Global Trade and Finance 5: After De Minimis, Inflation and Trade Shifts

Author(s): Scott Douglas Jacobsen

Publication (Outlet/Website): The Good Men Project

Publication Date (yyyy/mm/dd): 2025/09/23

 Michael Ashley Schulman, CFA, Chief Investment Officer of Running Point Capital Advisors, offers expert insight into current global financial dynamics. Schulman offers timely insights into macroeconomic trends, U.S. fiscal policy, and the global tech landscape. 

In this interview with Scott Douglas Jacobsen, Schulman outlines near-, medium-, and long-term effects of the U.S. ending the de minimis import exemption. Short term, inflation blips are muted as impulse buys fall; by the holidays, core goods may rise ~0.1–0.2% before fading by spring. Compliance and fulfillment costs jump as postal flows snarl (~80% drop), pushing sellers toward warehousing, express, and bonded lanes; documentation becomes a moat. India faces tariff pain in textiles, gems, leather, while EU-U.S. tariff shifts ease but don’t revive 2H25 guidance. With WTO trade growth near 0.9% and softer Fed policy, the dollar drifts lower. Rare-earth risks hedgeable only 20–30%.

Interview conducted September 11, 2025. 

Scott Douglas Jacobsen: With the U.S. permanently ending the low-value package “de minimis” exemption, what are the following two-quarter impacts on inflation? 

Michael Ashley Schulman: In the short term, it may be less than we think. Much of what is bought in de minimis packaging is “want have” not “need have;” meaning you may see less impulse purchases of cheap shirts, costume jewelry, holiday ornaments, knockoff Labubu dolls, almost irresistible handbags, belts, and glow in the dark socket wrenches in online shopping carts as consumers react to the higher prices by just saying no.

Medium-term, we will see an increase in prices as consumers adjust to the reality not only for the “must haves” but also for the trinkets, novelty items, self-treats, little gifts, and impulse purchases—we are a consumer society after all! I’m pencilling in roughly 0.1% to 0.2% of core goods price increases into the holiday quarter, then a fade by early spring as importers pivot to bulk freight and domestic warehousing.

Longer term, new supply sources, routes, and supply chains will be created and negotiated, and new manufacturing facilities will be built. So yes, we will see price rises, but they will be a step up in the going cost, not a continuous inflationary increase. In the long run, prices may return to a more competitive level as supply increases.

For now, the policy change is genuine, abrupt, and already snarling mail flows, which amplifies near‑term pricing noise. We’ve seen international postal traffic to the U.S. plunge 80% in the first week. My estimates aside, researchers peg the consumer cost in the low‑double‑digit billions, which is not a CPI calamity, but it will singe some price tags.

Jacobsen: What about fulfilment costs and Customs and Border Protection compliance? 

Schulman: In reference to the best-selling video game of all time, I’m labelling this Call of Duty: Tariff Ops III rather than Black Ops III; see what I did there with the pun on duty? You’ll need your supply chain maps, cheat codes, and advanced powers to make it through each level. But seriously, someone should be working on generative AI and agentic AI apps for that: generative AI to help Customs and Border Protection staff keep up with and account for the new rules, and agentic AI for buy-side fulfillment efficiency.

For now, picture a live SNL sketch where carriers do tariff algebra on stage. Non-postal shipments must clear like regular freight. Postal parcels are subject to either ad valorem duty or a temporary, per-item specific duty while the systems catch up. Postal operators and airlines need bonds, data pipes, and new billing logic, which means higher handling fees and more delays before steadier processes are incorporated. In the short run, third‑party logistics providers will nudge rates and minimums higher, and some sellers will batch inventory into U.S. warehouses to dodge failed doorstep collections. For peak-season shoppers and merchants, that means fewer surprise bargains and more surprise paperwork. It’s “Stranger Things,” but the monster is compliance.

Jacobsen: I can tell by your tone that there is something additional you want to add here or bring up.

Schulman: Yes, Scott, you’re right. How do I phrase this? What is non-obvious here, and few people are discussing, is that Customs and Border Protection compliance means duties are paid early in the journey, and inventory sits longer in domestic warehouses (whereas previously, there was no duty and no domestic warehouse time). Days inventory outstanding stretches from nil, zilch, and zippo to some number greater than zero. Small sellers lose float.

Compliance becomes a competitive moat. The cheapest good is not the most affordable good once you price in forms, data validation, and fines. Scale players—your leading large-cap or focused category-killer international and multinational firms—utilize customs expertise as a barrier to entry or a competitive advantage, capturing market share from micro-exporters. The internet promised disintermediation. Trade rules re‑intermediated it, if that’s a word.

Shippers move from postal to commercial express to ocean consolidation to foreign‑trade zones and bonded warehouses. Each path carries different fees, delays, and risks of returns. Consumers may see quirky price spreads across identical or nearly identical items depending on the fulfillment lane rather than the brand.

Expect product designers to change materials, fasteners, or assembly sequences to jump tariff lines legally. The invisible battleground becomes what’s known as the Harmonized System code, or the Harmonized Tariff Schedule, along with rules of origin paperwork. Swapping out a three‑cent gasket can beat a three‑dollar duty. The business edge is characterized by stable excellence in documentation, working capital, product design, and insurance, rather than mere price optimization.

Additionally, the labour bottleneck is expected to be in the public sector, rather than the private sector. Customs staffing, port inspectors, and certification agencies are capacity constraints. When the bottleneck lies in government headcount, the only solutions are hiring and software. Firms that pre‑clear and pre‑validate will outperform simply by avoiding the queue.

Jacobsen: After Washington doubled tariffs on many Indian goods, which export sectors will now absorb the hit? 

Schulman: The blast radius covers India‑to‑America staples. I believe I lightly touched on this in our last interview; textiles, apparel, gems, and jewelry come first to mind, followed by leather and footwear, furniture, select auto components, and a swath of organic chemicals. Smartphones and most pharmaceuticals are broadly carved out for now. Within companies, margins compress, orders reshuffle, and some capacity gets mothballed as buyers trial Vietnam, Mexico, and Turkey. The bigger irony is that both sides take a growth haircut while Russia’s oil cash flow barely flinches.

Jacobsen: Is India’s best near-term response to retaliate or litigate at the WTO, or even re-route its trade? 

Schulman: I’m in no position to advise New Delhi or 3-time PM  Narendra Modi what to do, but India’s best response may be to do what it is doing, run toward the open arms of its historical enemy and the U.S.’s main rival, China, while looking back over its shoulder to see if the U.S. gets the hint. The headline is ‘tariff pain’; the reaction is portfolio rotation within India. Firms under the Production Linked Incentive support program can lean harder into components where they can prove origin and quality quickly, while sectors with messy traceability lose orders first. For example, lab‑grown diamonds and engineered gems hold share better than mined stones when paperwork tightens.

Or maybe the brilliant maneuver is a three‑step dance number as you suggested in your question, file and litigate at the World Trade Organization (WTO) to set the record, even if there’s no calendar-year resolution. Retaliate with a scalpel, not an axe, to keep room for dealmaking with Washington. Then sprint on re-routing—which is already underway—by leaning harder into Europe, Africa, and Southeast Asia, while courting China for finished drugs and chemicals sales. The innovative shock absorber is diversification and bilateral trading rather than a whole tariff food fight.

Jacobsen: As the EU proposes scrapping tariffs on U.S. industrial goods and the U.S. cuts car tariffs to 15% retroactive to August 1, will original equipment manufacturers (OEMs) in Germany and Italy upgrade 2H25 guidance and 2026 capex? 

Schulman: My initial gut instinct says no on the guidance; German and Italian OEM auto manufacturers should not upgrade 2H25 outlooks. But there are nuances and refinements to that bold statement. Many consumers bought forward—shifted demand to earlier in the year, to front-run tariffs on big-ticket items like cars. Thus, all Fiats, as well as low- and mid-end BMWs, Audis, and Mercedes, may not see a pickup in demand, especially since consumerism seems to be softening slightly. High-end buyers of German Porsches, Italian Ferraris, and Lamborghinis, who are less price-sensitive, may maintain their purchasing steady.

Thus, answering your question head-on, on the European Union tariff olive branch and the United States cutting car duties to 15% retroactive to August 1, guidance gets less gloomy before it gets giddy. This trims the tariff cloud that drove profit warnings, but finance chiefs move from red to amber, not straight to green. Expect cautious second‑half language and a cleaner 2026 plan that possibly tilts capital spending toward North American localization with more final assembly and parts plants that immunize against the next plot twist. Call it not-so-Fast and not‑so‑Furious—that movie series still creates some of the best auto puns and analogies.

Jacobsen: With the World Trade Organization revising 2025 goods trade growth to ~0.9% amid front-loading by the IMF, nudging 2025 global GDP to ~3.0%, what does this duo mean for the dollar or trade-finance availability in Q4? 

Schulman: With goods trade growth trimmed toward 0.9% and global growth nudging 3%, I foresee air pockets then crosswinds. However, there are more factors affecting the dollar than trade growth. You have President Trump weakening the dollar, and any shift down in interest rates by the Fed may aid that dollar decline trend we’ve seen this year. Front-loading of imports pulled demand into mid-year, so late-year shipping looks choppy. As softer labour numbers coax the Fed toward interest rate cuts, expect an even softer dollar. Trade finance won’t disappear; it will just reprice. Letters of credit and supply-chain finance track SOFR (Secured Overnight Financing Rate), which will drift lower, while banks lean harder on compliance and collateral. Funding remains available for solid credits, pricing eases slightly into year-end, and the paperwork becomes heavy—in other words, compliance becomes the gatekeeper at the door.

Thus, as merchants pivot to traditional invoices and letters of credit, hedging shifts to forward contracts, adding a low‑drama but steady bid for the U.S. dollar into quarter-end even as the greenback possibly weakens.

Jacobsen: Given China’s entrenched rare-earths grip (~70% mining, 90% processing, 93% magnets), how much supply-chain risk can OEMs realistically hedge in the next year or two?

Schulman: Ah, yes, rare earth magnets, the new Fatal Attraction! The best hedge would be for businesses to stock up and buy all they can now. However, it’s really a question of supply constraints aligning with OEMs’ cash or financing constraints. Theoretically, borrowing to fund inventory of this sort should not be too expensive, as it would be an asset-backed loan on an easily sellable commodity; however, underlying price volatility may make the loan slightly pricier. Realistically, though, multi-year inventory stockpiling will address supply and export constraints; thus, the near-term win is not autarky or self-sufficiency, but rather multi-sourcing, e.g., inventory buffers for critical programs, magnet-to-magnet recycling, and design optionality between permanent-magnet motors and wound-rotor or switched-reluctance alternatives. You can hedge 20% to 30% of risk quickly; you hope and buy time for the rest.

U.S. magnet output has restarted at pilot scale, with one Texas facility ramping up neodymium‑iron‑boron (NdFeB) magnets and others signing offtake deals committing OEMs to purchasing all or a significant portion of future output before production begins; this helps secure crucial project financing. India, Australia, Japan, and the U.S. are adding processing capacity, but refining and heavy rare‑earth separation remain the choke points. Large manufacturers can maybe hedge 20% to 30% of critical magnet demand for high‑priority programs by next year using non‑China feedstock, long‑dated contracts, and increased recycling, while the rest stays exposed to Chinese price and policy swings. Full independence is a late‑decade ambition unless you accept significantly higher costs or redesign motors away from rare‑earth magnets.

Jacobsen: Thank you for the opportunity and your time, Michael. 

Schulman: Always a pleasure to chat with you about global macro. When geopolitics and liquidity collide, narratives get rewritten in real time, so keep supply chains flexible, portfolios under a watchful eye, and your sense of humour fully hedged. Stay nimble, stay curious, stay caffeinated, hedge your exposure, question your priors, and never let a good regime shift go to waste. Also, can I be so bold as to end in a rhyme?

Inflation sticky, U.S. tricky, China opaque,
The Fed’s soul-searching for policy’s sake.
Markets aren’t stable, they’re feeling the fake.
So stay alert, stay wise, and know what’s at stake.

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