In the first refunding announcement under Trump’s new Treasury Secretary Scott Bessent, the US Treasury unveiled that it will keep sales of longer-term debt unchanged well into 2025, despite Bessent’s criticism of Janet Yellen’s issuance strategy before he was picked for the job.

Just two weeks into the most important job at the US Treasury, Bessent left intact former Secretary Janet Yellen’s agenda. As widely expect, the Treasury will next week sell $125 billion of debt in its quarterly refunding auctions, which span 3-, 10- and 30-year maturities, the same amount as in the past several quarters. The gross issuance will refund $106.2 billion of privately-held Treasury notes and bonds maturing on February 15, 2025, and will raise new cash from private investors of approximately $18.8 billion.  The securities are:

• A 3-year note in the amount of $58 billion, maturing February 15, 2028;
• A 10-year note in the amount of $42 billion, maturing February 15, 2035;
• A 30-year bond in the amount of $25 billion, maturing February 15, 2055.

The table below presents the auction sizes for the November 2024 to January 2025 quarter and the anticipated auction sizes for the February to April 2025 quarter:

In its refunding statement, the Treasury said that it believes “its current auction sizes leave it well positioned to address potential changes to the fiscal outlook and to the pace and duration of future SOMA redemptions.” It added that based on current projected borrowing needs, “Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters.”

Similar language has been in place since the last bump up in auction sizes at the start of last year. Bessent, a former hedge fund manager, had accurately charged Yellen of engaging in so-called Activist Treasury Issuance – holding down longer-dated debt sales in order to depress long-term borrowing costs and aid the economy before the election. Of course, he was right. Alas, reversing Yellen’s catastrophic policies can’t and won’t happen overnight absent a meltdown in the bond market, hence why the issuance schedule is as it is.

The forward guidance was maintained even as the Treasury Borrowing Advisory Committee — a key panel of Wall Street advisers composed of dealers, fund managers and other market participants — issued a separate letter in which “uniformly encouraged Treasury to consider removing or modifying” the language at this meeting, and “Some members preferred dropping the language altogether to reflect the uncertain outlook, though the majority preferred moderating the language at this meeting.”

However, the reason why there was no change – yet – is that the committee felt that any shift in language shouldn’t be read to indicate an expected near-term increase in nominal coupon auction sizes, consistent with the TBAC recommended financing tables and Treasury’s aim to be regular and predictable. TBAC members also noted “elevated uncertainty regarding macroeconomic developments and the fiscal trajectory and observed that current primary dealer assumptions and issuance levels imply a $1.5T cumulative funding shortfall over the next three years.”

According to Bloomberg, a senior Treasury official told reporters, when asked about that guidance, that TBAC offers recommendations, but they are just that, and it’s the department that decides.

The Treasury also said it was keeping issuance of floating-rate debt unchanged, while continuing to nudge sales of some Treasury Inflation Protected Securities, or TIPS, higher. Over the coming three months, the Treasury said it plans to use bills — which mature in up to a year — to address any seasonal or unexpected variations in borrowing needs. With regard to TIPS, the Treasury detailed the following adjustments for the February-to-April period:

• Increase the April 5-year TIPS new issue to $25 billion
• Boost the March 10-year TIPS reopening by $1 billion, to $18 billion
• Maintain the size of the February 30-year TIPS new issue auction size at $9 billion

Separately, we remind readers that since the start of this year, the Treasury has been constrained by the federal debt limit, which kicked back in after being suspended in mid-2023. The department has begun to use extraordinary measures to keep from a debt-ceiling breach. That means that even as the US piles on about $1 trillion in new debt every 100 days, the public won’t see the actual balance until some time in July when the next debt ceiling deal is implemented, after much kicking and screaming by so-called conservatives, who fold – as they always do – when realizing there is no other option.

“Until the debt limit is suspended or increased, debt limit-related constraints will lead to greater-than-normal variability in benchmark bill issuance and significant usage” of cash management bills, the department said.

Another complication for the Treasury’s debt sales in coming months and quarters is uncertainty when the Federal Reserve will halt, or slow further, its steady reduction in holdings of Treasuries — currently running at up to $25 billion a month.

When the Fed does fully phase out its so-called quantitative tightening, it will reduce the amounts the Treasury needs to borrow from the public, a process which will coincide with the drainage of the Reverse Repo facility which has been aggressively used to fund the US government through Bill issuance.

As Bloomberg notes, dealers now see QT as ending in the summer, rather than spring, “slightly increasing the expected need for borrowing from the private sector in 2025,” TBAC reported to the Treasury. “Market participants viewed risks as skewed towards a later finish,” although factors including debt-limit dynamics may complicate the Fed’s assessment of whether there’s an “ample” magnitude of reserves in the system, TBAC said.

Finally, Wednesday’s statement also detailed a new schedule of buybacks for the early February through May. As the schedule indicates, the Treasury plans to conduct weekly liquidity support buybacks of up to $4 billion per operation in nominal coupon securities. Treasury also plans to resume cash management buybacks around the April 2025 tax date.  Amounts purchased in cash management buybacks temper reductions to bill auction sizes that would otherwise occur over the same timeframe.

The US trade deficit widened dramatically at the end of 2024 on a surge in imports prior to the start of President Trump’s second term and his follow-through on the promise of sweeping tariffs.

The December shortfall in goods and services trade grew nearly 25% from the prior month to $98.4 billion (slightly bigger than expected), Commerce Department data showed Wednesday.

Source: Bloomberg

That culminated in a full-year deficit of $918.4 billion after the gap narrowed in 2023 by the most in 14 years…

Source: Bloomberg

The value of imports, unadjusted for inflation, increased 3.5% in December, while exports fell 2.6% as firms appeared to front-run the tariffs and loaded up on inventory…

Source: Bloomberg

Not a good sign for Q4 GDP but the ‘front-running’ pre-loaded inventories shift should be over by the end of January.

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A climate rule issued during the Biden administration is officially dead after judges on Feb. 3 granted the new administration’s request to drop an appeal.

Three judges of the U.S. Court of Appeals for the Sixth Circuit, acting on a recent request from the Federal Highway Administration (FHWA), dismissed the government’s appeal of a ruling that found the FHWA administrator overstepped his authority in issuing the rule, which forced states to take steps to reduce carbon dioxide emissions from vehicles.

The judges cited a court rule that lets appealing parties dismiss appeals voluntarily if doing so would not create injustice or unfairness. The states that sued over the rule did not oppose the dismissal.

U.S. District Judge Benjamin J. Beaton ruled in 2024 that the rule went beyond the authority that lawmakers had given the FHWA administrator.

“Congress supplied a clear and sensible instruction: the Administrator may set standards and measures that states use to plan and assess the National Highway System. The Administrator, who retains significant delegated authority over the federal spending program, may review state planning reports for compliance and potentially even withhold conditional federal funding,” the judge said at the time.

“But what the Administrator may not do is step into the shoes of sovereign states, which set their own targets for any standards and measures established by the agency.”

The government lodged an appeal to try to overturn the ruling.

Before the Sixth Circuit could rule on the case, though, President Joe Biden exited the White House, and Donald Trump became president.

The attorneys representing the FHWA then informed the court that the agency “no longer wishes to pursue appellate review of the district court’s decision in this case.”

The states that sued over the rule, including Indiana and Kentucky, told the court that they did not oppose the request for dismissal.

“Dismissal of this appeal leaves in place the district court’s judgment, supported by its thorough opinion. It confirms that the States will not be subject to this unlawful Rule regardless of whether this appeal is withdrawn. And it is therefore an important victory for the States and the rule of law,” the states said.

U.S. lawmakers who had filed a brief opposing the rule celebrated the dismissal.

“This dismissal reinforces the fundamental principle: federal agencies do not have authority Congress doesn’t grant them,” Sen. Kevin Cramer (R-N.D.) said in a statement.

Sen. Shelley Moore Capito (R-W.Va.) added, “The decision from President Trump’s FHWA to end the previous administration’s attempt to continue this unlawful rule is an important step in reversing the extreme climate agenda of the past four years, and I’m thrilled that the court has now officially dismissed the appeal.”

The US economy added 183k jobs in January according to ADP – the biggest addition since October. Additionally, December’s +122k print was revised dramatically higher to +176k…

Source: Bloomberg

… above January’s print was above all analysts’ expectations.

Source: Bloomberg

But…

“We had a strong start to 2025 but it masked a dichotomy in the labor market. Consumer-facing industries drove hiring, while job growth was weaker in business services and production,” said Nela Richardson, Chief Economist, ADP.

With Goods-producers seeing 6k job losses (the worst since Nov 2023) as Services soared 190k (the most since July 2023)

Source: Bloomberg

With Manufacturing hit hard once again…

Source: Bloomberg

Additionally, for the first time since March 2023, Job-Stayers saw wage growth accelerating…

Source: Bloomberg

So, does Powell care about manufacturing jobs or just all jobs? None of this signals a more dovish ‘data dependent’ Fed will move soon.

by Nebojsa Malic via The Libertarian Institute,

For six weeks now, Serbia has been rattled by what purports to be a student rebellion, leading to the prime minister’s resignation last week and rumors of a snap election. Students from sixty-three colleges of five state and two private universities, as well as four high schools, have emerged as the biggest challenge to the Progressive Party rule—and fueled rumors of yet another “color revolution.”

Late last week, thousands of students rallied in the capital, Belgrade, and set out to Novi Sad—the second-largest city in Serbia and the site of a tragedy that has served as the trigger for the entire crisis. The concrete canopy of the Novi Sad railway station, built in 1964 but recently renovated as part of a bullet-train project, collapsed on November 1 and killed fifteen people.

Serbia is the largest of the six successor states of the former Yugoslavia (Kosovo, a breakaway Serbian province that the United States and its allies consider the seventh, doesn’t count). Belgrade has no intent of joining NATO, which bombed Serbia in 1999 to occupy and detach Kosovo, and officially aspires to join the European Union—but has so far refused to go along with the bloc’s sanctions regime against Russia.

All of this has obviously made Serbia a place of considerable interest to Moscow, Beijing, Brussels and Washington alike. President Aleksandar Vucic has managed to parlay his balancing diplomacy into a flow of infrastructure and industrial investments, such as the high-speed train project to the Hungarian border.

Opposition parties backed by the West have long accused the Progressives of skimming funds from these construction projects—as they have done while in power—and quickly seized on the Novi Sad tragedy to demand resignations and arrests. They followed the same playbook as in 2023, when a mass shooting at a Belgrade school was harnessed into “Serbia against violence” protests to demand regime change. Vucic responded at the time by calling a snap election, which the Progressives easily won, however.

At first the Novi Sad protests looked like another street performance that would fizzle out. Everything changed when students of two Belgrade university schools walked out of class on November 21. The following day, a group of theater students blocked the street outside their school, and got into a fight with several motorists who tried to get through. The incident triggered a domino effect at Belgrade colleges, with self-appointed “student soviets” (plenum) eventually demanding the arrest and identification of the attackers—who they claimed were ruling party activists—and the release and full pardon of all students involved in the fracas.

Since then, student groups have blocked strategic streets in Belgrade for at least fifteen minutes every day, around the time of the canopy’s collapse. They have also expanded their demands: for the government to publish all the records related to the railway station’s reconstruction, and to increase the higher education budget by 20%.

The student soviets claim they are trying to compel a lawless government to uphold the law and punish those responsible for the canopy carnage. The way they have gone about it, however, is itself extra-judicial. Only a small percentage of students from every school are part of these “soviets,” and no one knows who their ringleaders are. Their spokespeople claim to be apolitical and want nothing beyond the four demands. Yet when the government tries to appease them by fulfilling their demands, they refuse to take “yes” for an answer.

Meanwhile, Western-backed opposition and NGOs have repeatedly tried to take over the protests and use them to overthrow the government. There have been calls for a “student-nominated expert cabinet” and even a new constitution (though notably not an election).

Watching the students, it is hard not to sympathize with them. They’re young, idealistic, patriotic, hungry for justice—something the Serbs value highly—and are filled with energy. Yet all of these things also make them the perfect tool of forces that have already weaponized human kindness and decency to nefarious ends, both in Serbia and elsewhere.

The protests are unusually well-organized, photogenic, and media-savvy. Every march or blockade is ringed by “staff” in high-visibility vests and sometimes hard hats. They brandish Serbian flags as well as banners declaring “no surrender” on the issue of Kosovo, reinforcing their patriotic bona fides. The logo they have adopted is a red handprint, insinuating that the government has “blood on its hands” because of the canopy collapse.

The “red hand” appears to have been lifted from Mjaft! (Enough), an Albanian “social justice” NGO founded in 2003 and funded by the United States and George Soros for years. It appears to have gone defunct in 2021, but one of its leaders, Erion Veliaj, had become the mayor of Tirana since then. No one has come forth to claim ownership of the “bloody hand” logo by the Serbian student soviets, so far.

People of Serbia are normally wary of street protests, remembering the bitter aftertaste of their October 2000 “democratic revolution” against then-President Slobodan Milosevic. Many of the people involved believed they were taking part in a spontaneous revolt against Milosevic’s purported “betrayal” of Kosovo—only to discover they had been played by the National Endowment for Democracy and its clever blueprint of subversion that would become known as the “color revolution.”

Those protests too were led by “students”—or rather, what started as a student group before getting infiltrated by NED. Known as Otpor (Resistance), they used a black fist as their symbol and also had clever marketing and branding, all funded by the American taxpayer.

Some of the people behind the October 2000 coup later openly boasted about getting “suitcases of cash” via the U.S. embassy and various NED cutouts, and a small number went on to become professional revolution-mongers in places like Georgia, Ukraine, and North Africa.

Knowing all this, the “red hand” protests certainly raise a number of red flags—including literally, in the form of a random Ferrari banner used by anti-Milosevic protesters in the 1990s. Attempts by the NGOs, Western-backed parties and some EU propagandists to co-opt and divert the protests to their own ends also stink to high heaven.

This is the scale of the mass protests in Serbia against President Vucic

Video from Saturday’s protest pic.twitter.com/5OcXAFaf26

— Visegrád 24 (@visegrad24) February 3, 2025

Moreover, the student soviets’ high degree of organization and discipline is in stark contrast to the generally disorganized and demoralized state of pro-Russian, “sovereignist” or right-populist forces in Serbia in recent years.

Normally a PR-savvy politician, Vucic has reacted to the protests in a clumsy fashion, eventually settling on a policy of appeasement that only seems to have emboldened the demonstrators. Every time he appears close to calming them down, a violent incident escalates things. On two occasions, cars trying to pass through the blockades injured young women holding the line—fortunately, not seriously. Yet a poem has already appeared on social media fantasizing about a deliberate vehicle attack turning fatal.

The night after Vucic called for calm and said he had met all the students’ demands, a group of protesters went to graffiti the Progressive Party offices in Novi Sad. They were confronted by some of the party members armed with bats, and one girl got her jaw broken. This is what triggered the resignations of Prime Minister (and Progressive Party chair) Milos Vucevic and the mayor of Novi Sad.

There are several ways this could end. The students could declare victory and go back to their colleges, having put the government on notice. Or they could keep going until they get hijacked by the NGO-opposition axis, which has already made plans in the media to seize power and launch purges of the Progressives. There is a non-zero chance of political violence escalating into a shooting war.

Whatever happens, the “red hand rebellion” seems to have scuttled Serbia’s opportunity to “reset” relations with the United States, or serve as the host of the Ukraine peace summit, being a truly neutral venue genuinely sympathetic to both Presidents Donald Trump and Vladimir Putin.

Looking to move to Europe and wondering what kind of jobs one could get there? We have some insights to share.

This chart, via Visual Capitalist’s Pallavi Rao, shows the most in-demand jobs in the EU, as sourced from a year’s worth of online job advertisements.

Data for this graphic is from Eurostat which looked through hundreds of hiring websites in 2023.

They warn that ads don’t automatically mean new jobs. Multiple advertisements could be counted for the same vacancy. Meanwhile, employers don’t always advertise for their vacancies, and sometimes advertise even when they don’t have vacancies.

Europe Really Needs Some IT Support

Nearly one-in-ten job advertisements in Eurostat’s database were for an Information and communications technology (ICT) specialist. In pure numbers that amounted to roughly 871,000 ads in 2023.

Note: *Includes Manufacturing and Construction Supervisors. **Includes Teacher Aides. Figures rounded.

What do ICT people do? Nearly anything IT related. It could range from user support and troubleshooting to installing and maintaining network operations and devices.

Also wanted: software developers, with 515,000 ads posted in 2023.

For those without tech skills, fear not, there’s a lot of other parts in the EU economy that need good people.

European businesses need sales and marketing support (across different experience levels: managers, professionals, and agents).

People who like to do numbers can also find a place in there (payroll clerks, logistics support, and accountants).

And for those who like working with their hands—workers in manufacturing, transport, and electrical equipment installation are also needed.

Looking to make some extra income? Creator Neomam Studios partnered with NetCredit to look at The 20 Best-Paying Side Hustles. Marketing comes out on top here.

Authored by Andrew Korybko via substack,

Trump’s confirmed interest in Ukraine’s rare earth minerals is being interpreted by some as beneficial for Zelensky amidst uncertainty about his commitment to Ukraine. One of the points from Zelensky’s so-called “Victory Plan” calls for letting his country’s allies extract its critical minerals. New Secretary of State Marco Rubio recently warned about the strategic advantage that China derives from its control over the rare earth mineral supply chain so he might have influenced Trump’s views on this issue.

US Senator Lindsey Graham raised awareness of Ukraine’s critical mineral riches during his trip there last June after he claimed that they’re sitting on $10-12 trillion worth of such wealth. Trump 2.0’s foreign policy focus on more muscularly containing China in all ways predictably predisposed him to appreciate the abovementioned point from Zelensky’s “Victory Plan”. The problem though is that the bulk of Ukraine’s critical mineral wealth is under Russian control and Ukrainian forces continue retreating.

At the same time, Special Envoy for Ukraine and Russia Keith Kellogg’s words about how Ukraine needs to hold its long-delayed elections were seen as Trump’s interest in brokering a ceasefire, after which martial law can be lifted, the elections can be held, and the new government can then begin peace talks. This expectation contrasts with what Trump said a few days later about his interest in Ukraine’s (largely Russian-controlled) rare earth mineral deposits and the attendant possibility for proxy escalation.

Instead of abandoning his efforts to freeze the Ukrainian Conflict by doubling down on military aid in the hopes that Zelensky’s forces will then recapture these deposits from Russia, which could perpetuate the proxy war and thus derail his foreign policy agenda, Trump might instead try to cut a deal with Putin. One of the conditions that Trump could make for coercing Ukraine into withdrawing from at least some of the territory that Russia claims as its own might be for Putin to sell the US some of these minerals.

Putin might agree to this depending on how far Trump is able to coerce Ukraine into withdrawing, plus there’s a pragmatic argument in favor of this arrangement in that it could form a trust-building measure for the US one day allowing the EU to partially resume some Russia gas pipeline imports. The purpose would be to restore a degree of Russia and the EU’s pre-conflict complex economic interdependence, albeit this time under US supervision, as a reward for Russia complying with a ceasefire.

Russia requires capital and technology to fully exploit the rare earth deposits that are now under its control, both of which could be provided by the US, with the first possibly involving the return of some seized Russian assets so long as they’re invested into this endeavor. If successfully implemented, then this proposal could lead to more creative diplomacy of the sort suggested at the end of this analysis here for depriving China of Russia’s enormous resource wealth, which aligns with Trump’s foreign policy goals.

Ukraine wouldn’t be left completely in the lurch, however, since other smaller rare earth mineral deposits still remain under its control. These could be given to the US in exchange for continued military aid, even if the latter is curtailed when compared to its height under the Biden Administration in the run-up to summer 2023’s ultimately doomed counteroffensive. If Trump already reaches an agreement with Putin on the Russian-controlled deposits, then Zelensky would have little choice but to agree to this deal.

Far from the full military support that he expected to receive in pursuit of recapturing those lost deposits, he’d only end up with whatever the cost-conscious Trump Administration determines is the absolute minimum that the US considers that Ukraine requires for keeping the peace. This is the best outcome for those on all sides who truly want peace, but it requires substantial will on both the US and Russia’s parts along with the US coercing Ukraine into agreeing, none of which can be guaranteed.

Authored by Thomas Brooke via Remix News,

Switzerland has halted its development aid to Eritrea due to the African nation’s refusal to accept the return of its nationals who have been denied asylum in Switzerland.

The decision was confirmed by Michael Steiner, spokesperson for the Federal Department of Foreign Affairs (EDA) in an interview with broadcaster SRF.

A valuation report from the Swiss foreign ministry stated that attempts to link foreign aid to greater political cooperation with the repatriation of Eritrean citizens had failed.

“We are currently not supporting any further projects in Eritrea. No further progress could be made when it comes to migration,” Steiner told the broadcaster.

The Swiss Federal Council initiated a development aid program in 2016 designed to improve vocational training for young people in the country in an attempt to help Eritrea build its infrastructure and improve economic and employment prospects in the country.

The program resumed in 2017 after the Swiss discontinued development activities in Eritrea in 2006 due to the political landscape at the time.

Switzerland had hoped that by providing financial assistance, Eritrea would agree to receive deported asylum seekers. However, the Eritrean government has only accepted voluntary returnees, showing no interest in a broader migration dialogue, according to the federal report.

There are currently 200 Eritrean nationals awaiting deportation from Switzerland, which the African nation is refusing to accept responsibility for.

From the end of May, no further financial aid will be transferred to Eritrea, though minor support initiatives may still be considered in the future. However, no new projects in Eritrea will be funded moving forward.

The Swiss government had previously expressed optimism that the program was starting to show improvements in dialogue with the Eritrean authorities, claiming in an initial evaluation report that “Switzerland has much more information about the situation on the ground than it did in the past, it has access to government departments, it has built a basis of trust, and it has created an opening in view of new developments.”

However, some politicians remained skeptical including Damian Müller, a lawmaker for the Liberal Party and a member of the House of Representatives’ foreign policy committee, who suggested a change in strategy was required.

“The fact that Eritrea continues to reject forced repatriations is proof of this,” he said.

The current vice-president of the same committee, Greens parliamentarian Sibel Arslan, said the policy was wrong to begin with and that development aid programs should continue regardless of cooperation on migration.

“The Greens have always been against the idea of mixing international cooperation with migration policy. This kind of linkage is mistaken.”

While Eritrea claims to be a democracy, many Western observers classify it as an authoritarian state ruled by a single-party system. The situation has led to a significant Eritrean diaspora across Europe, with around 7,000 Eritrean asylum seekers currently residing in Switzerland. The largest ex-pat community is found in neighboring Germany where 80,000 Eritreans live currently, many of whom are unemployed or work in low-wage jobs.

The Eritrean communities in European countries have often sparked civil unrest due to clashes between pro and anti-government protesters, seen most recently in the United Kingdom, Germany, and Sweden.

WATCH: Major civil unrest as Eritrean migrants attack riot police with sticks in Camberwell, south London. pic.twitter.com/277hHNTuDW

— Remix News & Views (@RMXnews) December 30, 2023

With Eritrea refusing to take back rejected asylum seekers, Switzerland is now exploring alternative solutions. The Federal Council is looking for third countries willing to accept Eritrean nationals who are subject to deportation. However, as of now, no such agreements have been reached.

Read more here…

The US Postal Service has suspending inbound international packages from China and Hong Kong Posts, delaying or blocking shipments from giant online retailers, and Amazon competitors, like Shein and PDD’s Temu. USPS said letters and flat mail from China and Hong Kong would not be affected, according to a statement on its website.

Potential reasons behind the suspension could be to ensure the tariff is enforced and not bypassed by potential loopholes such as exporting multiple packages of smaller value items (see more here).  While it’s not clear what prompted the move, it followed Trump’s decision to revoke a “de minimis” rule for China, which previously allowed small packages under $800 to enter the US duty-free. This exemption, often used by Chinese-linked e-commerce companies, was removed as part of a new 10% tariff on goods from China and Hong Kong, which took effect just after midnight Tuesday Washington time.

Washington is cracking down on a loophole that retailers like Temu and Shein have used for years to expand in the US, allowing them to ship high volumes of small packages and gain an edge over competitors like Amazon.com Inc. Critics say the flood of parcels from China is difficult to track and may contain illegal or dangerous goods.

According to US Customs and Border Protection data quoted by Bloomberg, the total volume of de minimis shipments into the US hit 1.4 billion packages in fiscal year 2024, about double the number in 2022. Predictably, discount online retailers like Temu and Shein contributed significantly to the spike in volume.

However, disruptions from the move may be more limited now than it would have been in previous years, as other postal operators have taken over the USPS’s role in handling cross-border lightweight e-commerce packages, including those from China, according to a US Office of Inspector General report in May 2023.

US officials have alleged that parcel mail, direct from China and via third-party countries, is a gateway for illicit drugs, including deadly fentanyl. “What the cartels in China have done is exploit that loophole to smuggle in not just fentanyl but all sorts of drugs,” White House trade adviser Peter Navarro told Politico in an event in Washington Tuesday.

The China tariff order took effect even as two others, for Mexico and Canada, were put on hold. Trump has hinted at a possible call with Chinese leadership this week, though details remain unclear. While the White House has not ruled out a deal to pause the Chinese tariffs, which could also impact the Postal Service’s ban, nothing has been confirmed yet.

Shares of Alibaba fell more than 2% in Hong Kong, while JD.com tumbled more than 5%, while the Hang Seng China index losses also extend, down 1.8% now.

In a Goldman note published late on Tuesday, the bank tried to assess the impact of Trump’s removal of the de-minimis exemption on China’s e-commerce platforms, where PDD’s Temu has the highest US exposure amongst China cross-border players. Here are some of the highlights from the report (full note available to pro subs in the usual place).

For PDD, US contributes to around ~40% of GMV for Temu, while Temu was a 10% loss drag to PDD group profit in FY24E (and with minimal valuation implied by PDD’s current market cap). Despite the new regulations, Goldman believes cost advantages of eCommerce platforms vs. US offline retailers will continue given the lower cost structures for online businesses (fewer layers between factories and end consumers), while Chinese platforms will continue to diversify their merchant bases beyond China to local merchants.

• An evolving Temu business model and global diversification prior to these developments in tariff policy development, where Goldman has seen:
  • 1) Temu’s geographical diversification with the US contribution to Temu’s global MAU from 100% at the time of launch in early-2023, down to its latest at 15% of Temu’s global MAU as of Dec 2024 as per the latest eCommerce tracker, with fast expansions in South America and the Middle East;
  • 2) Temu’s ongoing US business model evolve from full-entrusted model (direct air freight shipments that enjoy de-minimis exemptions), to a rapidly growing semi-entrusted model that has recently reached 25% of Temu US GMV as of Sept-2024 (where merchants ship products by sea freight under traditional trade ahead of time); and,
  • 3) Temu’s business model has expanded beyond air freight direct shipments, with the semi-entrusted models launched in 19 countries as of Jan-2025 that do not depend on de-minimis.
• The limited value that has been ascribed by the market to the Temu business in PDD’s current market cap, as investors have been anticipating pending regulatory clarity around U.S. tariffs, multiple countries’ de-minimis rules, personal data, etc. before being willing to ascribe any meaningful value to the Temu business, despite the fact that the Temu app reached 350mn MAU in Dec 2024.

Looking ahead, the key to watch will be any further tariffs/tax applied for cross-border eCommerce goods, and development of any risks related to targeted tariffs on China imports/app bans/expansion of the Uyghur Forced Labor Prevention Act (UFLPA) Entity List etc. that could pose a potential impact to Temu’s US operations. Meanwhile, Goldman expects ongoing geographical diversification away from the U.S. and business model shifts, including further expanding the launch of its 3P marketplace to local US merchants (local-to-local sourcing) and semi-entrusted model for cross-border eCommerce platforms. Of course, none of that will help Temu if other countries piggyback on similar sanctions as the US.

More in the full Goldman note available to pro subs.