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the Tariff laws it barred companies like
temu and Sheen from exploiting the
Dominus exemption that's meant for
individual tourists to bring home
souvenirs after their trips Chinese
companies lost billions of dollars in
market cap within seconds of the law
being announced while many experts
deemed it to be a measure that was long
overdue in 2023 the United States bought
more goods from Mexico than it did from
China for the first time in 20 years
this is a big win for the North American
Regional economy and it shows that the
US has become less dependent on Chinese
Imports or that's what it seems like
during the same year shipping volume
from China to Mexico skyrocketed by
59.7% the shipping route from China to
Mexico is the fastest growing one in the
world right now but this is a bit
suspicious as you might expect a lot of
the goods arriving in Mexico get
transported to the United States
afterwards there's one reason to take
this elaborate route following the trade
War this has become a smart way to
circumvent us sanctions Mexico hasn't
placed the same tariffs and import
restrictions on Chinese goods and
China's tactics are ever evolving as
it's now also moving factories to Mexico
and trying to find legal loopholes this
involves Mexico's free access to the US
market with the US MCA agreement as well
as the DI Minimus import law so let's
take a deep dive into how China is
trying to bypass Washington's trade
restrictions and how the US is reacting
to this but before that please be sure
to hit the like button below any video
relating to the CCP has a risk of being
downvoted by ccp's 50 Cent Army to kill
its reach in the algorithm so your likes
help us out a
lot China benefits a lot from the
current global economy it has the single
biggest Trade Surplus in the world
reaching 823 billion US in
2023 about a third of this comes from
the United States as it posted a trade
deficit with China worth $279 billion in
the same year you can understand that it
doesn't want to lose this precious
Market but starting in 2018 it looked
like the days of American dollars
flowing to China were over because
president Donald Trump didn't like this
huge trade deficit he decided to place
tariffs on various Chinese Goods
effectively starting a trade War the
first round of sanctions targeted more
than 1,300 Chinese products worth around
50 to 60 billion in yearly Revenue
Beijing retaliated by placing import
tariffs on American Goods including
agricultural products these back and
forth rounds of tariffs continued until
the end of
2019 ultimately $362 billion worth of
Chinese products faced increased import
tariffs China had placed sanctions on
1,717 items from the US us representing
about onethird of all imported American
Goods in the beginning of 2020 the US
and China reached an agreement to stop
the escalation the US wouldn't increase
tariffs if China bought $200 billion of
additional American Products including
$50 billion of agricultural Goods the
deal didn't really succeed because China
failed to meet the Target by about
40% although the trade War slowed down
due to the pandemic it definitely didn't
end the Biden Administration kept the
import tariffs in place and the results
of this policy showed right now the
trade deficit with China is at its
lowest point since
2010 even though this is also related to
the economic slowdown in China the
import tariffs definitely had an impact
in some areas President Joe Biden has
even escalated the trade War through
export controls he wants to destroy
China's capability to make advanced
chips looking into the future there is
no sign of the trade War slowing down
Joe Biden has called for the import
tariffs on Chinese steel and aluminum to
go from 7.5% to
22.5% just like his former rival Trump
he is still advocating for perfectionist
trade policies to preserve strategic
Industries still if Trump wins the
election there will be even more
escalations in the trade War Trump has
called for import tariffs of more than
60% on various Chinese Imports
effectively killing China's
competitiveness in the US market because
of the looming dangers of the trade War
the CCP decided to use the North
American free trade zone to its
Advantage first we have to talk about
China's involvement in the Mexican
manufacturing industry 40% of Mexico's
GDP is in manufacturing and a large
share of its products are going to the
United States this is caused by the free
trade zone within the US according to
the usmca agreement Goods produced in
Mexico can be exported to the largest
economy in the world without paying any
import tariffs because it understands
how strategic the country is China has
gotten itself a good position in
Mexico's supply chain it exports tons of
electronic equipment machinery Plastics
and metals to the country in this way
it's indirectly making money from the US
as the supplier of its leading
manufacturer but the Chinese involvement
goes far deeper than that Chinese
companies are setting up shop in Mexico
itself to produce Goods for the United
States Market the husan industrial park
in nevon is the biggest example of this
two Chinese investment funds develop the
area just 200 km south of Texas the park
now houses various chinese-owned
factories worth hundreds of millions of
dollars producing electronics fiture and
gardening equipment in general Chinese
investment into Mexico has been growing
over the years reaching a peak of over
$400 million in
2021 and this could get even bigger in
the future Chinese corporate Giants are
also o considering investing in Mexico
including the electric vehicle maker byd
this is the largest ev company in the
world by the way recently overtaking
Tesla in car soul for many companies
including byd it makes a lot of sense to
have a manufacturing plant in Mexico
cars from chinese-owned factories in
Mexico still count as Mexican products
even though the profits go to China
Chinese cars face a 27.5% import tax in
the US while these technically Mexican
cars only have a 2.5% tariff meanwhile
the EVS made in Mexico qualify for a
$7500 tax credit under the inflation
reduction act apart from the Tariff and
the tax incentives the business
fundamentals of moving to Mexico are
also pretty good manufacturing wages in
China have been increasing as you can
see on this chart and Chinese
manufacturers are facing growing labor
shortages according to one survey 80% of
them had shortages in the 100 or the
thousands China's very own Ministry of
Education said the country will be short
30 million Factory workers by the next
year to make the move even more
appealing Mexico has slightly lower
manufacturing wages than China and more
stable salaries there's also a reduction
in transportation costs because the
manufacturers move close to their target
market still we can be a little bit
skeptical about the Chinese factories in
Mexico for example they may have strong
connections to Chinese supply lines
although the products are labeled as
made in Mexico many of the assembled
Parts could be Chinese what's even more
important is that the profit goes into
China's Pockets this means that China
will be able to replace some of the
income lost through the trade War but we
also have to take into account the
geopolitical effects through huge
investments in the Mexican economy China
is getting itself a lot of influence in
the country this dashes the hopes of an
independent North American economy
and it strains the ties between Mexico
and the
US still involvement in the Mexican
manufacturing industry is not the only
way to circumvent the trade War tariffs
to understand this we have to look at
the e-commerce Giants te and Sheen their
business model is pretty simple sell
just about everything at incredibly low
prices temo in particular has been
pretty successful for months it was the
most downloaded app on both the App
Store and the Google Play Store in the
United States
the company even got itself a Super Bowl
advertisement with the slogan shop like
a billionaire but there's something
Shady about these Chinese e-commerce
businesses they use a loophole in the US
tax code called the DI Minimus rule
Imports under a certain value don't have
to pay duties back in 2015 the price
limit for this tax exemption was raised
from $200 to
$800 this was originally supposed to
save a lot of hassle for Customs
officials and people crossing the border
you don't have to fill out complicated
forms for souvenirs or other small
purchases but for Tamu and Sheen it's a
different story they use the Dom Minimus
rule for nearly all of their packages
which is a big deal these two websites
alone now contribute to nearly a third
of all small packages coming into the US
in total the Dom Minimus tax exemption
applies to more than 75% of packages
coming to the US the law was written
before the rise of e-commerce so
lawmakers couldn't really have seen this
coming but the effects of it are
dramatic because Chinese e-commerce
stores don't have to pay import taxes
they can easily outcompete us businesses
apart from having a negative effect on
American businesses and jobs this is
also hurting Washington's tax and trade
policies the Lost import tax revenue
ranges in the billions of dollars and
because online web shops are now a
multi-trillion dollar industry this also
has an effect on the US China trade
balance but the consequences of the
loophole go beyond just teu and Sheen
warehouses are now being built in Mexico
and Canada to take advantage of the D
Minimus regulation they're basically
fulfillment centers for companies
selling in the US certain retailers need
to import Chinese products and bulk
which is a big problem because of the
Hefty tariffs warehouses in the Border
towns on the Northern or Southern border
can be the solution the containers can
be processed at low tariff rates in
Mexico or Canadian ports like the port
of insata or the port of Vancouver then
the company ship individual packages to
their customers across the border using
the DI Minimus tax exemption this does
come with a downside of longer delivery
time in some states but in a lot of
product categories the benefits outweigh
the downsides keep in mind that these
products don't fall under the usual
duty-free access in the US MCA area
because the products are made entirely
in China Canadian or Mexican importers
would have to pay taxes if the price was
above
$800 but that's the trick because the
scheme is so effective there's a lot of
investment going into this for example
the logistics and shipping company meis
has recently built a new Factory in
Tiana the city is located just 20 M from
San Diego about 32 km in its press
statement the company said that it could
use this for Section 321 shipment type
operations AKA tariff evasion Amazon did
the same thing building a fulfillment
center in the same Border Town China is
the biggest beneficiary of this because
it gives it a Lifeline to keep selling
products to the US these Bordertown
warehouses are one of the explanations
for the flourishing China Mexico trade
and to some extent this is also
happening on the US Canada Border it
isn't as obvious as Chinese Goods going
through Mexico since Canada's imports
from China have only grown slightly as
you can see on this chart Canada's
Imports of Chinese products in increased
with about $1 billion over the last 4
years although it's relatively small a
part of this 10 billion consists of
Chinese products going through Canadian
fulfillment centers one logistics
company in Toronto is very open about
this when the trade War Began it
advertised itself as an intermediary
between Chinese manufacturers and US
consumers nevertheless the tactics for
circumventing trade War taxes might
disappear just as fast as they've come
US government officials are increasingly
wey of Chinese investments in Mexico and
the potential EV plants of byd will not
go unnoticed the current Administration
has already expressed concern about
Chinese car makers entering the Mexican
economy and it might introduce policies
to combat them in the scenario that
Trump gets reelected these sanctions are
coming there for sure Trump has said he
will impose a 100% tariff on ev's made
in Mexico by Chinese companies if he
gets elected meanwhile Washington is
putting pressure on Mexico and Canada to
produce higher import taxes on Chinese
Goods recently some senior members of
President Biden's Administration went to
Mexico in order to discuss these issues
and they were pretty successful soon
after Mexico announced tariff hikes on
more than 500 kinds of imported Chinese
products the new rates sit between 5 and
50% affecting around 90% of all the
Chinese Goods going to Mexico because
the United States is still the most
influential country in Mexico the the
Mexican Government likely had no choice
but to listen to its demands and the
most deadly blow to China's tariff
invasions might be yet to come several
us lawmakers are calling for an end of
the current Dom Minimus regulations
together with a coalition of labor
unions and Manufacturing groups they're
pushing a bill to reform the import tax
system one idea is to vary the DI
Minimus threshold based on where the
product originates from the bill could
get bipartisan support because many of
the issues at hand are important to both
sides for one the current tax exemptions
are hurting the trade balance with China
on top of that many Chinese products are
fundamentally uncompetitive this is
especially true in the textile industry
China is flooding the US with heavily
subsidized textile products made with
the forced labor of the Wagers in Xin
Jang because they can sell these
uncompetitive products without paying
import duties us businesses are at a
huge
disadvantage this has terrible effects
in the span of just 5 months the
American textile industry lost 10
manufacturing plants another blatantly
obvious issue with the di Minimus rule
is the amount of packages entering the
US unchecked most packages under $800
are not checked by custom officials
that's why 90% of all illegal Goods
including narcotics enter the US in this
way with the alleged Chinese involvement
in the fenel crisis this is a huge
problem all the more reason to scrap
this legislation
so the US government has the tools to
stop the Chinese tariff evasions this is
very important both for the trade War
but also for the wider geopolitical
picture in order to keep the free trade
zone with Mexico and Canada Washington
needs to limit the Chinese Goods flowing
into these countries this is the only
way to have an independent North
American economy which is a very
strategic asset the free trade zone
stems back to 1994 when the three
countries cut out Import and Export
tariffs to stimulate trade in this
regard it was very successful trade
between the United States and Mexico
increased almost 10 fold from $81
billion in 1993 to $798 billion in
2023 us trade with Canada also grew
significantly more than tripling from
$211 billion to $774 billion over the
same time period the free trade zone did
get a lot of criticism from Donald Trump
because of the negative impacts on us
Industries and jobs this is because the
United States has a trade deficit with
both Mexico and Canada which means that
the US market gets flooded with foreign
Goods in 2022 this trade deficit was
53.5 billion with Canada and $1 130.5
billion with Mexico still there's one
big advantage to the economic ties with
these neighbors to understand this we
have to look at the drastic changes in
the geopolitical landscape the Pax
Americana which lay the basis for global
trade has been replaced by a multi molar
World Order because of Chinese trade the
US isn't the Undisputed leader of the
world anymore both economically and
geopolitically the economic implications
of this new world order are huge for
decades the United States had
safeguarded global trade but if the
world order turns multi-polar the
downsides of global trade could outweigh
the benefits Washington can't guarantee
stability anymore which means that
global trade routes can be disrupted by
conflicts in turn many countries want to
limit their economic dependencies on
other nations but there's one exception
to this rule Regional allies while
Washington may lose its leadership role
in the Middle East or East Asia it can
definitely keep it in North America this
is why economic ties with Mexico or
Canada are beneficial even in a
multi-polar world and Mexico and Canada
can replace many of the older trade
partners that the United States has
Mexico has relatively cheap labor and
it's a huge sales Market Market
something that us businesses can benefit
from Canada is already the biggest
energy supplier to the US accounting for
52% of total petroleum Imports this
could last a while since the country has
the third largest estimated oil reserves
only behind Venezuela and Saudi Arabia
on top of that Canada also has a lot of
other natural resources like minerals
and metals Washington's neighbors have a
lot to offer which is why the region is
worth protecting from Chinese influence
to sum it all up China tried to
manipulate the free trade zone and other
legal loopholes to circumvent us tariffs
with the China Mexico trade route
flourishing as well as the rise of TAMU
and Sheen this seems to be working but
the cracks they're already showing with
new pieces of legislation and diplomatic
action Washington is trying to stop
China's evasion tactics hopefully this
will secure the trade balance and
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