New tariffs hit, but there's a $100 billion hole in the data

Axios

04-03-2025

President Trump is making good on tariff threats that will raise the stakes of his trade war with China and potentially ignite another in North America.
Why it matters: It breaks a pattern of head fakes that Wall Street and businesses large and small had hoped would continue.
Financial market jitters and bearish anecdotes from manufacturers were not enough to stave off the levies.
Trump will plow ahead with 25% tariffs on Canada and Mexico and double the import tax on Chinese goods to 20%, with few hints of how long the measures will last.
The big picture: Escalating trade tensions have already been rattling the economy, even before the new tariffs took effect. Many businesses are in paralysis, waiting to make a move until White House trade policy becomes clear.
One manufacturer told the Institute of Supply Management: "Customers are pausing on new orders as a result of uncertainty regarding tariffs. There is no clear direction from the administration on how they will be implemented, so it's harder to project how they will affect business."
The intrigue: A new report casts doubt on how much a tougher trade policy has actually choked off imports from China.
There are upwards of $100 billion worth of imports "missing" from U.S. data in 2024 — a trend that has worsened since the opening salvo of the trade war in 2018, according to calculations by the New York Fed.
The report finds that "virtually all" of the missing imports can be attributed to China.
If the nation is more reliant on Chinese imports than previously thought, the economic blowback from new tariffs might be worse.
What they're saying: "Simply stated, the U.S. is saying it buys from China a lot less than what China says it is selling," Hunter Clark, an economic policy advisor at the New York Fed, writes in a new report.
One clue: At least half stems from a surge of small-dollar purchases from China — including imports from popular Chinese e-commerce sites — that are not included in U.S. import data.
These de minimis imports are not subject to tariffs and enter the U.S. "with light documentation," the report says, which contributes to the understated import data.
About 67% of all the de minimis imports came from China between 2018 and 2021, according to estimates by Customs and Border Protection cited in the New York Fed report.
What to watch: An initial Trump order would have effectively scrapped the de minimis exemption. That has been paused indefinitely while the government develops a system to collect tariffs on these goods.
If that exemption is nixed, the effects might be notable for consumers buying from shopping platforms like Shein or Temu.
The bottom line: Trump has implemented bigger China tariffs in recent weeks than in the entirety of his first stint in office.
A flaw in trade measurement adds to the uncertainty of how big a shock might be ahead.