WSJ What’s News - The ‘New Silk Road’ of Cheap Chinese Goods

Episode Date: December 18, 2025

A.M. Edition for Dec. 18. WSJ reporter Chelsey Dulaney says the redirection of China’s export machine caused by a U.S. crackdown on low-value imports is one of the most dramatic examples of how President Trump’s trade war has rewired global trade. Plus, Trump uses a prime-time address to announce tariff-funded dividends for troops. And Warner Bros. Discovery demands a stronger personal guarantee from Larry Ellison in Paramount Skydance’s $77.9 billion takeover bid. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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President Trump announces a dividend for American troops, saying his tariffs will pay for it. Plus, the IRS tries out a new tool in its fight to track down profits shifted to low-tax countries. And we'll drop in on some surprising stops along China's new Silk Road. We spoke to one person who built a shed in their backyard in London. They store these packages from the Chinese exporters, and then they package in the market. up themselves when the order comes in and then they ship them off. It's Thursday, December 18th. I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories, moving your world today.

President Trump defended his handling of the economy in a primetime address last night, claiming to have brought down prices, announcing a warrior dividend of $1776 for active duty service members to be funded by tariff revenue and predicting a drop in housing costs. The way do you see, the numbers are going to be shocking, and I'll soon announce our next chairman of the Federal Reserve, someone who believes in lower interest rates by a lot and mortgage payments will be coming down even further. The president also promised that Americans would have the largest tax refund season of all time next year. He has teased the prospect of sending $2,000 checks funded in part by tariffs to low and middle-income Americans, though congressional

Republicans have expressed misgivings about handing consumers' cash, given the size of the budget deficit, and with inflation running almost a full percentage point above the Fed's target. We're set to get a fresh look at U.S. inflation data for November at 8.30 a.m. Eastern. Meanwhile, we are exclusively reporting that President Trump was told by his former lawyer, Alan Dershowitz, this week, that the Constitution wasn't clear on the issue of of whether Trump can serve a third term in office. Earlier this week, Dershowitz gave Trump a draft of a book he's writing on the topic, which describes scenarios by which he could become president again.

Asked by the journal about the meeting and Trump's position on the matter, White House spokeswoman Abigail Jackson said the country would be lucky if he served a longer period. The U.S. has approved more than $11 billion in arms sales to Taiwan. The sales include howitzers, missiles, and anti-tank drones, along with truck-based Heimars missile launchers that would help Taiwan to inflict pain on invading forces, part of the island's goal of making China think twice before attacking. The sales come at a delicate time as President Trump tries to demonstrate support for Taiwan while pursuing trade deals with China and taking a softer stance toward the country. But reporter Joe Yu Wang in Taipei

said that Beijing didn't mince words in condemning the latest news. Beijing has opposed to any arms sales to Taipei, and this time it's no different. A spokesperson for the Chinese foreign ministry expressed the reaction, saying that any efforts to arm Taiwan would backfire, and that it is basically wasting Taiwanese people's hard money to buy weapons. The U.S. government has accepted fault for the collision between an Army helicopter and an American Airlines regional jet that killed 67 people earlier

this year near Washington, D.C. In a filing in federal court yesterday responding to a lawsuit filed by the wife of one of those deceased passengers, the Justice Department said the Blackhawk helicopter failed to maintain vigilance to avoid the jet, and that air traffic controllers overseeing Reagan Airport's airspace didn't properly alert pilots that the aircraft were on a collision course. The government has said it's willing to pay damages to the families of those killed. Coming up, Warner Brothers tells Paramount that billionaire Larry Ellison will have to put more of his own fortune on the line if it wants a deal. And we'll look at the new silk road of cheap Chinese goods flooding into Europe. Those stories and more after the break.

in reducing the harm caused by smoking, but it requires actionable steps. Now is the time to modernize Canadian laws so that adult smokers have information and access to better alternatives. By doing so, we can create lasting change. If you don't smoke, don't start. If you smoke, quit. If you don't quit, change. Visit unsmoke.ca. We're learning more about Warner Brothers' discoveries move to urge shareholders to reject Paramount Skydance's hostile takeover bid. The company says it had concerns about the use of an Ellison family trust to backstop the equity commitments within the deal, and it wants Oracle founder Larry Ellison to give a personal guarantee that he, not an opaque trust, is committed to the almost $78 billion bid. Paramount said Warner was misleading its shareholders about the trust, noting that it contained over a quarter trillion dollars of assets.

Lulu Lemon has a new investor. Its activist Elliott Investment Management, which we exclusively report has built up in over $1 billion stake in the struggling athletic apparel retailer and wants to turn it around. Elliott has reportedly identified a CEO candidate, and its arrival comes as Lulu Lemon's founder agitates for change at the business. which he had attacked for killing innovation and losing its cool. The IRS is seeking $16 billion from META in a move that intensifies a decade-long fight in U.S. tax court between the tech company and the federal government. According to the IRS, the owner of Facebook and Instagram booked billions of dollars of profit in Ireland, which should have been taxed in the U.S.

To date, the IRS has analyzed corporate arrangements by valuing them at a moment in time, agreements are made. But critics argue that companies know more than the government about their businesses and can arrange deals to reap outsize low-taxed profits abroad. So journal tax reporter Richard Rubin told us the IRS is now changing tack and examining the deal in light of meta's booming success in the years that followed it. This time they're saying, no, no, no, like let's just look at the actual profit experience. And so that's called a periodic adjustment. The IRS really hasn't done it before. And they're trying it right now. It's still a very important signal. It's interesting that the IRS is doing this even while has been quite friendly to

tech companies, including meta, in the Trump administration. And it's a sign of the IRS in some ways just doing things the way they had been doing it, not even really shifting to a more business-friendly approach. The IRS hasn't publicly indicated whether or when it will try a similar strategy in other tax disputes. Coca-Cola and Microsoft are among the companies fighting the government on cross-border tax questions. We've talked here before about the flood of Chinese products around the world this year that has helped to power a $1 trillion good surplus for the country. But just how those goods are reaching the far corners of the globe and especially Europe

makes for quite an unexpected story, as the journal's Chelsea Delaney is here to share. Chelsea, we've got a bunch of fun details to get into here as we paint this picture of what you've called a shadow logistic network. But first, what led you to report on this? I'm guessing there's kind of a, I don't know, a trade data instinct that led you to think there's a story to tell. Yeah, I think the original impetus was from trade data. I mean, after the Liberation Day tariffs, everyone was sort of worried about China sending a lot of cheap goods to other places after, you know, it got much more difficult to sell those things to the U.S. And one of the areas that was particularly vulnerable to this was de minimis export. So this is stuff like really cheap shirts. or things you get for your house on Timu or Shien, and a lot of that has been coming into the U.S.

through this exemption called the de minimis, and that was closed earlier this year. You saw almost immediately some of those massive Chinese e-commerce giants switch their advertising budgets. And so they pulled advertising from the U.S. and they started doing more promotions in Europe. So if you go on TikTok, you'll see hundreds and hundreds of videos of these like zero euro, zero pound Timu.

calls. That's what they're called on social media. And it's just all the stuff you can get for free. And so many videos of people just with these massive packages saying, oh, I bought this on Shian, I bought this on Timu. So that was one of the first things to really ship this year. And then the airline industry usually moves pretty slowly, or at least I thought it did, until I heard about some of the carriers that have kind of popped up very quickly to cater to this demand. The first wave of this came during the pandemic. Timu and Shian's starting to rise in Europe. And then this year it's gotten even bigger. we have seen these new players like popping up to move this stuff. And a lot of them, interestingly, are on what they're calling this new Silk Road. So it starts in China. It stops in someplace like Uzbekistan or Kazakhstan, and then they fly onto Europe. So, you know, we talk to airlines. You would maybe think that this stuff would all be going to London or Frankfurt or Paris, but it's actually not. A lot of it is going to small airports in the UK. One

of them is East Midlands Airport, which is kind of in this rural area in the middle of England. We went there and there were sheep nearby and there were tractors on the road. So that's been a really big one. And then the other really big ones are Hungary, this former military air base called Liege in Belgium. So it's, yeah, it's coming into unexpected places and then it's very quickly being distributed. Yeah, I was going to say people know DHL, they know FedEx, they know UPS, get familiar with my freighter and one air. Upstarts that are doing a huge amount of volume. So much of this logistics network growth is. fascinating, but it's going to have listeners looking around their own neighborhoods and

thinking, is this happening here too? Yeah. So this stuff is shipped directly to people. Like, this is drop shipping. Some of it will just immediately get shipped from a factory in China to the person at the end. Some of it will go into a big warehouse called overseas family warehouses. And these are basically, in most cases, Chinese immigrants who are storing some of these packages in their houses. We spoke to one person who built a shed in their backyard in London. They store these packages from the Chinese exporters, and then they package them up themselves when the order comes in, and then they ship them off. So it's been a huge business. One of these people we talked to was making around 5,000 pounds in a good month.

So, yeah, there's a ton of people piling into this industry now. I'm glad you mentioned de minimis earlier because part of the U.S. effort to slow down the flood of Chinese products has been precisely to go after tariff loopholes that allow low value packages to come into the U.S. without paying duties. that's what sent a lot of this stuff to Europe in the first place. Surely Europe must be thinking along those lines as well. Yeah, de minimis is obviously controversial, and Europe has kind of been lagging on this conversation all year. We've seen actually them starting to take action on it. So the EU is going to start levying fees on these small packages starting next year.

The UK is taking a little bit longer. They say it'll likely take until 2029. But yeah, this big open window is starting to get a little bit more shut in Europe as well. Journal reporter Chelsea Delaney. We've left a link to her reporting in our show notes. Check it out. The photos are great. Thank you, as always, for stopping by. Yeah, thanks so much for having me. And that's it for what's news for this Thursday morning. Today's show was produced by Hattie Moyer. Our supervising producer was Daniel Bach. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening. Thank you.