Last November, China imposed a raft of discriminatory trade restrictions on Lithuania for allowing Taiwan to open a de facto embassy in the capital. The restrictions went so far as to cut off not only all direct trade with Lithuania, but also all imports of products from other countries made with Lithuanian parts. Now, this week, the EU set up a €130 million scheme to support Lithuanian businesses affected by China’s measures. Under the EU scheme, affected Lithuanian companies can receive loans of up to €5 million, to be repaid within 24 months, for “sourcing of (new) inputs from different sources, looking for entering into new business markets or using the time to undertake such efforts.”
Admittedly, this is not a lot of money: Taiwan, whose economy is less than 1/20th that of the EU’s, in January extended a $1 billion credit fund to Lithuania, on top of another $200 investment fund. Still, the EU is sending an important message that it will stand up for its member states against coercion from China – or, at least, will do so on questions of free and fair trade.
A regulatory loophole means tens of billions of dollars of goods are entering the US free of tariffs and inspection. Under the de minimis rule, goods valued at $800 or under and shipped directly to the buyer can avoid tariffs. Customs data obtained by the Wall Street Journal show that the known value of de minimis imports was $67 billion in 2020, up from $40 million in 2012. Over 10% of Chinese imports by value now arrive in the US under the de minimis threshold. That means billions lost in tariff revenues. It also means large quantities of good that bypass customs inspection, making it easier for illegal items or goods made with forced labour to enter the US. One proposed way to close this loophole is to exclude goods from non-market economies like China’s from the de minimis option. That would deal a big blow to Chinese fast-fashion retailer Shein. Still, while closing the de minimis loophole could mean more tariff revenues and closer goods inspections – and could even help protect US e-commerce jobs – this is hardly the answer to the more fundamental US-China trade imbalance, and the non-market Chinese policies that propel it.