💰 5 Fact Friday: Death Of The Duty-Free Loophole

ECONOMY
1. Tariffs Are Back—And They’re Bigger Than Ever 🌎

In 2018, the first wave of Trump tariffs hit $283 billion worth of imports, slapping rates between 10% and 50% on everything from steel to semiconductors. That covered about 11% of total U.S. imports and 1.4% of GDP—enough to rattle markets, squeeze supply chains, and fuel a brief inflation spike.

The S&P 500, Dow, and Nasdaq all ended the year red, with small caps (Russell 2000) hit the hardest.

• S&P 500: -6.9%

• Dow Jones: -6.0%

• Nasdaq: -2.3%

• Russell 2000: -12.5%

Fast forward to today—tariffs on Canada and Mexico have already been postponed 30 days, signaling Trump’s willingness to negotiate. But if they do go into effect, alongside those already imposed on China, the impact will be far greater.

This new round of tariffs targets an estimated $1.36 trillion in imports—41% of total U.S. imports—a nearly 4X escalation from the last cycle. As a share of GDP, that’s 4.7% vs 1.4% in 2018.

So, what happened last time—and how should we play it?

Despite the 2018 turbulence, markets roared back in 2019. Inflation cooled (2.5% → 1.8%), the Fed reversed course (rate hikes → rate cuts), and trade deals provided relief.

• S&P 500: +29.8%

• Dow Jones: +23.7%

• Nasdaq: +39.5%

• Russell 2000: +22.9%

Last time around, tech stocks were the clear winners:

• The Nasdaq saw the smallest pullback and strongest rebound

• High-margin software and services businesses dodged supply chain issues

• Industrials, agriculture, and small caps took the biggest beating

Looking deeper, 10 of 11 S&P 500 sectors posted gains over the two-year stretch—only energy finished lower. Tech led the pack, while healthcare and utilities provided the most stable returns.

The bottom line is surprisingly intuitive.

If history rhymes, owning companies unaffected by tariffs—especially high-margin, asset-light businesses in tech—may be the best way to weather the storm.

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ECONOMY
2. China’s Duty-Free Free Ride Is Over 👀

For years, China’s e-commerce giants—Shein, Temu, and AliExpress—have had an unfair edge in the U.S. market. That just changed.

On Tuesday, Trump shut down the de minimis loophole, which had allowed sellers to import packages under $800 duty-free. Originally meant for American travelers bringing back souvenirs, it became a massive backdoor for Chinese retailers.

This exemption let Shein ship individual $10 dresses to U.S. consumers without paying tariffs. Meanwhile, American businesses importing the same products in bulk paid up to 54.5% in duties.

And this was no small issue. In 2023 alone, $54 billion in duty-free goods entered the U.S. under de minimis—with around 60% coming from China.

Now, the U.S. has eliminated a major cost advantage for Chinese retailers and moved closer to global norms—Canada’s de minimis threshold is just $15, and Mexico’s is $50.

Shipping Scales Are Still Tipped

The de minimis loophole was only part of the problem. The other? Shipping from China to the U.S. is often cheaper than shipping within the U.S.

Yes, really.

At any weight under ~2 pounds, it's cheaper to send a package from China to New York than from California to New York—sometimes by as much as 85%.

Why? The Universal Postal Union (UPU) classifies China as a “transition” country and the U.S. as a “target” country.

This setup means the U.S. indirectly subsidizes Chinese exports—on top of the Chinese government’s direct subsidies to boost its global e-commerce dominance.

Fast Fashion’s Sudden Slowdown

With de minimis closed, Chinese sellers now face customs duties, new administrative fees, and longer shipping times.

The result? Shein, Temu, JD.com, Alibaba, and even Amazon Haul will likely raise prices and see lower demand. Even Meta could take a hit, as Chinese sellers have been some of its biggest ad buyers.

Who wins? U.S. manufacturers and retailers, who finally get a level playing field. Longer term, even industrial real estate could benefit as Chinese platforms begin warehousing more goods inside the U.S.

Plus, lawmakers on both sides expect fewer counterfeit goods, forced labor products, and illicit imports slipping in under de minimis.

REAL ESTATE
3. Rental Prices Hit 3-Year Low 📉

For the 17th straight month, rents dropped nationwide.

The median rent is now $1,695 (-1.1%)—its lowest level since April 2022. This is all thanks to a construction boom that’s flooded the market with new apartments, especially in cities like Memphis (-6.7%), Denver (-5.9%), and Austin (-5.0%).

For renters, this supply growth is “welcome and signals an end to the pandemic-era rental market spikes,” said Danielle Hale, chief economist at Realtor.com. But she also warned: “As starts and completions slow, we anticipate seeing more balance in the rental market ahead.”

Right now, renters have the upper hand—landlords are offering 6-10 weeks of free rent, free parking, and gift cards to fill vacancies. Even lease renewals are getting competitive, with landlords slashing rents to keep tenants from moving out.

Still, affordability depends on what you rent…

• Studios: $1,419 (-1.3%)

• 1-Bedrooms: $1,579 (-0.9%)

• 2-Bedrooms: $1,880 (-0.9%)

and where you live…

• Memphis, TN: $1,174 (-6.7%)

• Cleveland, OH: $1,184 (-3.4%)

• New York, NY: $2,967 (+5.3%)

• San Jose, CA: $3,305 (+3.3%)

And if you’re hunting for affordable rentals, good luck. Demand is still highest for lower-cost housing, keeping those prices firmer than luxury units.

Will rents keep falling?

Maybe, but the supply boom is slowing down, meaning we’re likely nearing a floor before rentflation picks back up. If you’re looking for a deal, this might be your best shot.

STOCKS
4. Earnings At A Glance 📊

From blowout beats to post-earnings plunges, here’s how this week’s biggest reports shook up the market.

Alphabet ($GOOG) 🤖

Q4 revenue jumped 12% to a record $96.5B, but cloud growth missed estimates.

• Google Search & Ads: +13%, YouTube Ads: +14%

• Google Cloud: +30%, but below expectations

• 2025 AI Investments: Capex surging 43% to $75B for AI and data center buildout

Despite cloud weakness, Alphabet’s AI push and aggressive shareholder returns signal confidence in future growth.

Amazon ($AMZN) 📦

Beat expectations, but weak Q1 guidance sent shares down 3%.

• EPS: $1.86 (vs. $1.50 expected)

• Revenue: $187.7B (+10%)

• AWS Cloud Revenue: $28.7B (slight miss)

• Capex: Jumping to $105B in 2025, mostly for AI

As the world’s largest cloud provider, Amazon is racing to expand AI capacity. At present, the company claims it can’t keep up with demand.

Advanced Micro Devices ($AMD) ⚡

Q4 data center growth disappointed Wall Street, sending the stock down as much as 11%.

• EPS: $1.09 (beat)

• Revenue: $7.7B (+24%)

• Data Center Revenue: $3.86B, below expectations

• PC Chip Sales: +58%, Gaming Segment: -59%

Although AMD is growing at a “strong double-digit percentage”, the company continues to be overshadowed by Nvidia’s dominance—which has doubled sales two years in a row.

Walt Disney ($DIS) 🎬

Box office dominance and streaming growth powered a strong Q1.

• Revenue: $24.7B (+5%)

• Direct-to-Consumer (DTC): $6.1B (+9%)

• Parks & Experiences: $9.4B (+3%)

• 2024 Blockbusters: Inside Out 2, Deadpool & Wolverine, Moana 2

Disney remains the King of Content, leveraging price hikes, ESPN+ bundling, and cruise line expansion to drive profitability.

Eli Lilly ($LLY) 💉

Strong quarter, but weight-loss and diabetes drug sales disappointed.

• EPS: $5.32 (beat)

• Revenue: $13.53B (slight miss)

• Mounjaro Sales: $3.53B (+60%)

• Zepbound Sales: $1.91B (missed estimates)

With demand soaring, Eli Lilly and rival Novo Nordisk are investing billions to scale production. By mid-2025, Eli Lilly expects to produce 1.6x the incretin doses it did in 2024.

Ford ($F) 🚗

Solid Q4, but 2025 guidance disappointed amid pricing pressure and tariff risks.

• Revenue: $48.2B (+5%)

• Operating Profit: $2.1B

• 2025 Operating Profit Outlook: $7B-$8.5B (below expectations)

Ford’s CEO is focused on cutting costs and improving quality, but a bigger threat looms. Trump’s proposed 25% tariffs on Mexico and Canada could erase billions in industry profits and disrupt supply chains.

MicroStrategy ($MSTR) ₿

The Bitcoin bet is paying off—big time.

• New Bitcoin Holdings: 218,887 BTC ($20.5B)

• Stock Performance: +563% in the past year

• Q4 EPS: Missed, revenue fell 3%

MicroStrategy is now halfway through a $42B Bitcoin acquisition plan, solidifying its position as the largest corporate holder of BTC. The company is even rebranding to “Strategy,” signaling its full transformation into a Bitcoin investment vehicle.

Palantir ($PLTR) 🚀

Crushed earnings, sending shares up 23% after hours.

• EPS: $0.14 (+75%)

• Revenue: $828M (+36%)

• U.S. Commercial Revenue: +64%, Government Revenue: +45%

• New Contracts: Closed 129 deals worth $1M+, a record $803M in U.S. commercial total contract value

Palantir’s AI-driven defense and enterprise solutions are fueling strong momentum, with revenue expected to climb 31% in 2025.

Qualcomm ($QCOM) 📱

Blew past estimates with strong AI chip momentum.

• EPS: $3.41 (+18%)

• Revenue: $11.7B (+17%)

• Auto Chip Sales: $961M (+61%)

• IoT & AI-driven Processors: +36%

Qualcomm’s Snapdragon processors are fueling AI-powered smartphones, PCs, and smart vehicles. Meanwhile, its AI solutions help businesses run AI locally instead of relying on the cloud, cutting costs and improving speed.

Uber ($UBER) 🚖

Missed Q1 guidance, sending shares down 7%.

• Revenue: $12B (+20%)

• Mobility Revenue: $6.9B (+25%)

• Delivery Revenue: $3.8B (+21%)

• Gross Bookings Outlook: Below forecasts

Soft guidance rattled investors, but Uber’s autonomous expansion and partnerships with Delta and Nvidia could provide long-term tailwinds.

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STOCKS
5. Guess That Stock 🕵️‍♂️

This streaming giant just reported its first-ever full-year profit, sending shares to an all-time high. Can you name the company?

1. The platform went from an industry outsider to a driving force behind music’s revival—helping global music revenue climb from $13B in 2014 to $45.5B today.

2. One in 12 people worldwide now uses the service every month, with paid subscribers up 11% year-over-year to 263 million.

3. The CEO’s efficiency strategy is paying off—operating expenses dropped 16%, and gross margins hit a record 32%.

4. The company’s annual “Wrapped” campaign drove massive engagement, connecting with 245 million users in the first week alone.

5. AI is now built into every corner of the platform—powering personalized recommendations, AI-generated playlists, an AI DJ, and even internal automation to boost productivity.

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