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Early Start with Rahel Solomon

End Of Trade Loophole Has Major Impact For Shein, Temu; Source: Second Suspect Expected To Surrender To Police; King Charles To Deliver Parliamentary Address In Canada. Aired 5:30-6a ET

Aired May 27, 2025 - 05:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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[05:34:30]

POLO SANDOVAL, CNN ANCHOR: Authorities in China have launched a rescue operation after a huge blast rocked a chemical plant on Tuesday. The blast took place just a few hours ago in Gaomi City in Shandong province, which is located in the eastern part of the country.

You see here this towering plume of smoke that was sent up into the air engulfing also nearby buildings and damaging windows. A worker at another factory over three miles away actually reported hearing that blast and feeling the ground shake where they were.

[05:35:00]

It's unknown exactly how many people were affected by the blast.

Some incredible images there.

A trade loophole closed on Friday, and it could have a massive impact for American consumers. You see, millions of Americans -- they have flocked to sites like Temu and Shein, drawn in by some of these Chinese ecommerce sites, I should say, by some of those extremely low prices and a big variety of products. And that's partially because of the de minimis exemption, which allowed packages worth less than $800 to enter the U.S. duty free.

Well, that exemption actually expired on May 2 and prices -- they have already soared on some of these sites in recent weeks. Temu, for example -- they ended shipments from China to the U.S. and only fulfilling American orders from within that country. Also imposing some of these new tariffs and duties. Well, that has led to some shipping delays.

And all of this is happening amid the uncertainty of Donald Trump's trade war. At one point, the U.S. had imposed a tariff of 145 percent on Chinese goods. That's been temporarily reduced for most goods to 30 percent.

So what does all this mean? Let's explore all of this with exactly what this means for Chinese ecommerce platforms and American consumers that shop there. Joining us is Yao "Henry" Jin. He is an associate professor of supply chain management at Miami University joining us live from West Chester, Ohio. Professor, thank you for getting up early for us.

YAO "HENRY" JIN, ASSOCIATE PROFESSOR OF SUPPLY CHAIN MANAGEMENT, MIAMI UNIVERSITY: Oh, no problem at all. Thanks for having me.

SANDOVAL: So we've heard some folks refer to this as a sort of tariff ceasefire agreement -- this break from these tariffs. This exemption also allowed companies like Shein and Temu to really thrive until that loophole was done away with.

What do you think has fueled the Trump administration's desire to go after these specific companies that are providing some pretty low-cost goods, like apparel, to American consumers?

JIN: Well, so for one thing, the sheer volume of these goods that have been coming across the border in recent years have really left a large portion of goods, especially in things like apparel that are rather heavily taxes if you will for imports, and they -- these have not been levied any duties on.

And for the most part consumers were benefiting from being able to pay as to your point lower prices -- much lower than what they otherwise would have had to pay at a store like Forever 21 or some of the other fast fashion goods where retailers import in large volumes and that they do have to pay these import tariffs on.

And so for Donald Trump, part of going after the di minimis is really an extension from the Biden era when our policymakers started to pay attention to say hey, we have all of these packages coming through a border that is clogging up our customs and a lot of the times we have no way of tracing what is exactly inside these packages.

SANDOVAL: So if the U.S. market is no longer an option, where do you think these low-cost Chinese manufacturers will turn to, Professor? Is it -- is it hard to replace consumers in the U.S.?

JIN: You know, absolutely.

So from consumers' perspective the U.S. consumers have outside spending power compared to many other consumer markets. And so in regard to being able to find consumers who are willing to pay a certain level of prices for their goods, yes, U.S. consumers are difficult to replace.

Now what we've also been seeing is these companies have been pivoting towards markets like Australia, like the EU, which is also the reason why we start to see these countries trying to coordinate a response towards the so-called low-value goods coming across the border.

SANDOVAL: Let's talk about what's next, Professor, especially for this business model --

JIN: Um-hum.

SANDOVAL: -- that companies like Temu have relied on, which is essentially provide this vast selection of direct-to-consumer products at a cheap price. I mean, I've seen some reporting out there that this could potentially spell the end of fast fashion.

Is that the case in the Trump tariff world?

JIN: No, not at all. I do not believe that this is going to spell the end of fast fashion. What it is going to spell is the end of this particular type of fast fashion that Shein is offering because when you think about fast fashion as a category it really didn't start with Shein. Instead, it started with companies like Zara, H&M. And they have been thriving, and they did thrive even during the era of the di minimis of goods coming across the border.

And so what this also -- what it ultimately means is retailers like Shein and Temu -- they're going to have to adapt to basically a new reality.

[05:40:00]

Now, we have started to see is that Shein has been shipping goods across -- directly from China into the U.S. even after the closure of the di minimis loophole.

And for Temu, in recent weeks Temu actually started to resume some of their direct-from-China shipments into the U.S.

And so what we -- what we know is certain categories, even with the 30 percent, 54 percent, and up tariffs they are still viable as far as serving the U.S. consumer market is concerned.

What we've also seen is Temu has really shifted to this Amazonification model where, as you mentioned earlier, that they open up U.S.-based warehouses for local shipping.

And so the closure of this di minimis loophole is not necessarily going to spell the end of Temu and Shein in the United States but what it will do is we're going to see fewer selection and we're going to see higher prices and possibly slower service speed when it comes to packages being shipped directly from China.

SANDOVAL: This new reality that you describe, Professor, it will be interesting to see if perhaps retailers like H&M, for example, see this more as an evening of the playing field with the removal of this loophole.

Professor, we have to leave it there, but just some fascinating insight, especially for so many people in the United States that turn to these sites to fill their closets up. Professor Yao "Henry" Jin, I really appreciate your expertise.

JIN: Thank you so much.

SANDOVAL: Thank you.

Still ahead on EARLY START, New York police -- they are investigating a violent scheme to kidnap a wealthy Italian crypto trader. Coming up, what the alleged criminals were willing to do to get their hands on their Bitcoin password. (COMMERCIAL)

[05:41:10]

SANDOVAL: Welcome back to EARLY START. I'm Polo Sandoval in New York, and here are some of the stories that we are watching today.

Israel's military has issued evacuation orders for most of southern Gaza as it prepares for what it calls an unprecedented attack. A military official tells CNN Israel plans to occupy 75 percent of Gaza within two months as part of a new offensive, and this could force more than two million Palestinian civilians into a tiny strip of land.

The Kremlin spokesperson is downplaying Donald Trump's criticism of Vladimir Putin as "emotional reactions." And this follows Russia's massive aerial attack on Ukraine over the weekend. The U.S. president said that he was not happy with his Russian counterpart and has said that he'd gone "absolutely crazy." Dmitry Peskov blamed emotional overload for those comments from the president.

And police have arrested a man suspected of plowing into crowds at a trophy parade for the Liverpool Football Club. Dozens of people were injured but so far, no fatalities have been reported. Police say they are not treating the incident as terrorism, but they have yet to reveal the reason for this crash.

Here in New York authorities could learn new details about an alleged kidnapping of an Italian cryptocurrency trader. They say that he was held hostage here in New York and tortured for several weeks as part of a violent scheme to get his Bitcoin password. Now, a second suspect in the case is expected to surrender to the NYPD.

CNN's Gloria Pazmino with more.

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GLORIA PAZMINO, CNN CORRESPONDENT: That's right. The details are honestly quite bizarre and disturbing. Here is what we know. We know that police arrested John Woeltz, originally from Kentucky, 37 years old. A cryptocurrency investor who was arrested by New York police officers on Friday after they say a victim who he had kidnapped and been keeping hostage inside a Manhattan apartment for days actually managed to escape.

Now, police say that the victim actually arrived here in New York City from Italy on May 6 and ever since he was kept inside this Manhattan apartment in the SoHo neighborhood against his will. They are accusing John Woeltz of kidnapping him and holding him hostage as part of a scheme to obtain his Bitcoin password.

Now the victim, who has not yet been identified but is 28 years old, told the police that he was held there against his will and while he was held inside this apartment he was tortured by John Woeltz. He said that he was beaten. At one point he was shocked while his feet were in water. He was tied up with wire and at one point dangled over a railing over his refusal to give up this Bitcoin password. Now one thing that's not yet clear to us is exactly how the two men know of each other -- what kind of relationship they have. If they are some sort of business partners or if they had a personal relationship prior to this incident.

Now, John Woeltz was arrested and charged with kidnapping, assault, unlawful imprisonment, and criminal possession of a firearm. And police say that they found a lot of evidence inside that Manhattan apartment, including ammunition, cocaine, the wire that was used to tie up the victim, an electric saw that the victim says he was threatened with. They found body armor, night vision goggles, and even Polaroids photos showing the victim tied to a chair with a gun pointed to his head.

[05:50:00]

Now this went on for several days and at point, on Friday, the victim told police he believed he was going to be killed, so he gave up the password. That gave him a brief window of time because John Woeltz went into another room to retrieve a laptop. That allowed the victim to run out of the apartment and flag down a traffic officer who was able to get him some help. Police moved in shortly after that and made the arrest.

Now, John Woeltz is being held in custody without bail. Prosecutors telling the court that he had the means to escape if he was to be let out on bail, including owning a private helicopter and a private jet. He is being held and has not entered a plea but is expected back in court next week.

Gloria Pazmino, CNN, New York.

(END VIDEOTAPE)

SANDOVAL: Also in the United States, police in Philadelphia say two people are dead and nine others injured after a shooting in the city's Fairmount Park neighborhood. Three teenagers are among the wounded.

CNN affiliate KYW reporting that the shooting happened after a car meet-up. Police say that they have not recovered any weapons, nor have they released the names of the victims.

Earlier in the day the park had been filled with families marking Memorial Day with cookouts.

And nearly a dozen people were injured during a shooting in South Carolina this Memorial Day weekend. Police say someone opened fire after an altercation at a private gathering on a charter boat in the coastal community of Little River. Eleven people were taken to the hospital there. Ten were shot with some of the victims suffering critical injuries.

According to officials a North Myrtle Beach police officer accidentally shot himself in the leg while responding to this incident. And eight down, two more to go. Police have recaptured three more inmates who escaped from a New Orleans jail. They were part of a group of prisoners who staged a jailbreak earlier this month. Authorities are still searching for those remaining two inmates. They allegedly used electric hair trimmers to cut through the walls.

A source told CNN seven people are accused of aiding in their escape. One prison worker has already been arrested for allegedly turning off water to a toilet in that cell, and that allowed inmates to slip through.

And a former Arkansas police chief serving time for murder and rape remains on the loose after escaping from prison. Grant Hardin has now been on the run since Sunday. Corrections officials say Hardin disguised himself and was wearing a makeshift outfit designed to mimic law enforcement when he escaped from a state prison in northern Arkansas.

The 56-year-old has been serving a 30-year sentence for first-degree murder and two 25-year sentences for two counts of rape.

Well, as President Trump eyes Canada as the 51st U.S. state, Britian's King Charles has a very different wish. Coming up, details on the monarch's upcoming address to Canada's Parliament.

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[05:57:35]

SANDOVAL: Britain's King Charles, who is Canada's head of state, will begin the final day of his two-day visit to Ottawa in the coming hours. The monarch will deliver an address to Parliament and is expected to reinforce the message that's specifically directed towards the neighbors to the south that Canada is not for sale.

CNN's Paula Newton with our preview.

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PAULA NEWTON, CNN CORRESPONDENT: There was excellent weather and enthusiastic crowds as Canadians greeted King Charles and Queen Camilla on their visit to Canada.

It is a very quick visit -- less than 24 hours -- but has very crucial political importance for the government of Mark Carney. He extended this invitation to King Charles and King Charles accepted pleasing many Canadians as they have been enduring President Donald Trump's suggesting that Canada, in fact, would be better off not in the commonwealth but as the 51st state.

Now, the king and queen were greeted by those Canadians enthusiastically showing off some Canadian arts and crafts and food but also dropping a puck for a road hockey game. Tomorrow, though, will be all about opening Parliament and the king, King Charles, will be uttering the words -- those crafted by the government of Mark Carney. Now, Mark Carney himself really speaking quite forcefully about what

this visit means to Canadians and saying that this historic honor matches the weight of our times. It is important to point out that only one other time did a monarch open Parliament. That was the king's mother in 1957. So this is an extraordinary event.

And for that reason many Canadians really greeting this with a measure of admiration for the king, something that hasn't really been seen in several years in Canada. And for that reason it will also be important to King Charles to certainly show his importance and how much importance he places on being king of Canada.

Paula Newton, CNN, New York.

(END VIDEOTAPE)

SANDOVAL: And on Memorial Day in the United States here are some of the sights and sounds from Arlington National Cemetery as the nation's leaders came together paying tribute to the men and women who gave their lives in service of their country.

(BEGIN VIDEO CLIP)

J.D. VANCE, (R) VICE PRESIDENT OF THE UNITED STATES: To the families who have lost a son, a daughter, a husband or a wife, to every child here who misses your dad or your mom, know that your loved one, to us, is a hero.

[06:00:05]

DONALD TRUMP, (R) PRESIDENT OF THE UNITED STATES: They gave everything, and we owe them everything and much, much more.

(END VIDEO CLIP)

SANDOVAL: And we hope you had a meaningful and restful Memorial Day.

From Rahel, the team, and I, thank you so much for watching EARLY START. I'm Polo Sandoval in New York. "CNN THIS MORNING" starts now.