Good morning from the Financial Times.
Today is Thursday, February 6th, and this is your FT News Briefing.
Nations are reacting to President Donald Trump's plan for Gaza, and the U .S.
is closing a trade loophole that a lot of Chinese e -commerce giants love.
Plus, there's a showdown brewing between America and Europe over AI regulations.
I'm Mark Filipino. And here's the news you need to start your day.
Countries across Europe and the Middle East are strongly pushing back against Donald Trump's plan to take over Gaza.
Saudi Arabia said it would not establish diplomatic relations with Israel without an independent Palestinian state.
Jordan and Egypt also rejected Trump's plans for Gaza.
Turkey's foreign minister called the remarks unacceptable.
In Europe, Germany said Trump's plans would lead to new suffering, and the UK said Palestinians in the area must be allowed to rebuild.
The White House yesterday clarified Trump's statement, saying that the president did not necessarily mean a military intervention.
The European Union has American AI companies in its crosshairs.
Brussels is pushing ahead with new rules on artificial intelligence, even as Donald Trump warns that he'll hit back if U .S.
companies are fined.
I'm joined now by the FT's Barbara Moons to talk about this.
Hi, Barbara. Hi, Mark.
So the EU wants to enforce its new set of AI regulations.
Barbara, what are some of the most important or, I guess, controversial parts of the AI Act?
This law is really seen as the world's most comprehensive regulatory framework for AI.
And what you need to know is that companies that fail to comply could eventually face huge fines and could be banned from the EU, which is obviously sensitive for some of the big AI companies.
This week, we had some key provisions banning certain applications, such as social scoring, which came into force.
And then over the next two years, we'll have other provisions targeting large AI models that will be rolled out.
And how do some of these AI companies feel about that, Barbara?
So they argue that while there is a need for regulation, that this law and some of the consequences are going too far.
We had this week Meta's chief lobbyist, Joel Kaplan, arguing that the EU's approach towards AI will be unworkable and also that it will hamper innovation and investments in AI in the continent.
Meta has really been leading the charge against the EU's regulations towards AI and warning that the EU is trying to do two things at the same time.
The EU wants to be more competitive.
And at the other hand, it's regulating too much.
And like I said, Trump has threatened to retaliate in some way or another against the EU if they hit U .S.
companies with fines.
How are officials in Brussels thinking about that?
It creates enormous nervousness, obviously.
The commission has been cracking down on big tech to protect the country's digital markets.
And since Trump elections and his warnings towards Brussels, the EU has already moved to reassess some of the probes into companies such as Apple, Meta and Google.
When it comes to this specific act and its approach towards AI, it also wants to make sure that there is still innovation possible and still investment possible in the European Union.
Sounds like a pretty delicate balance.
How do you see that working in practice?
I think there will be a lot of discussions still when it comes to the EU's approach towards big tech, whether it's on AI, whether it's on the Digital Markets Act, other legislation of the EU.
And one of the key things that we'll be looking out for is how this fits with other discussions that the EU will have with the U .S., right?
when it comes to avoiding a trade war, for example, when it comes to security on Ukraine?
How important is it for the EU to actually make sure that it keeps this really tough regulatory approach towards US tech companies, especially if you look at it from a broader political or geopolitical perspective?
Barbara Moons is an EU correspondent for the FT.
Thanks, Barbara. You're welcome.
Disney is basking in the glow of its recent box office successes.
The film Moana 2 helped boost the company's earnings up 27 % last quarter.
Disney had a baller 2024 at the movies.
The studio pumped out the top three films worldwide last year.
That includes Inside Out 2, Deadpool and Wolverine, and yeah, Moana.
That's a big rebound from 2023, when a lot of investors were worried that the creative spark had left the Magic Kingdom.
Still, the earnings report wasn't all wishes upon a star.
Disney's theme parks struggled last quarter after two hurricanes hit Florida.
Now, investors have been watching this part of the business closely.
The company shares ended down yesterday around 2 .5%.
When Donald Trump hit Chinese imports with an additional 10 % tariff, he also abolished these kind of wonky rules called de minimis.
They're a trade loophole that exempts shipments of cheaper goods from paying any taxes, which is a pretty big deal if you're a massive retailer like Temu or Xi 'an.
William Langley has been looking into what this means for the Chinese e -commerce groups.
He joins me now. Hey, Will.
Hi, great to be here.
So first, Will, just give me a rundown of how this loophole works and how businesses like Xi 'an and Temu have taken advantage of it.
A lot of countries have de minimis rules, which basically set a monetary threshold below which imported items are able to avoid customs duties.
In the US, that's shipments below $800 in value.
So while these allowances were really designed to avoid placing excessive costs on consumers and businesses when they import low value shipments from overseas, Temu and Xiom had basically identified that selling small value shipments, often by air freight, rather than settling things in bulk orders
that often go by sea, as a lot of larger trading firms do, means that they can deliver goods to Western consumers more quickly and more cheaply.
And why would the US want to end this loophole?
So there are a couple of reasons.
Former US President Joe Biden had already lined up some new rules that was going to restrict de minimis exemptions.
The US has said for a long time that they fear this exemption is allowing Chinese e -commerce platforms to undercut local retailers or local groups that have to settle their orders in bulk and therefore have to pay customs duties.
However, the latest scrapping of de minimis came as a subclause on something entirely different, which was an executive order enforcing new tariffs on China, which was done with the stated aim of reducing the flow of fentanyl into the US from overseas, the rationale being that a lot of this stuff comes
in in small packages.
Well, given the extent that Temu and Xi 'an seem to have relied on De Minimis, how big of a deal is it for their bottom line that the rules are changing?
The rule change is going to make customs clearance for small value shipments from companies like Temu and Xi 'an significantly more complicated in the US and is likely to increase the workload of customs officials.
So if you look at a company like Xi 'an, costs are likely to rise, but it's unclear quite how much that will affect their bottom line.
Temu, meanwhile, have been recruiting sellers who have warehouse operations in the US.
Shein have also been expanding their logistics footprint there.
The idea behind that is likely that if you have warehouses in the US, you can switch to ordering items in bulk through the normal channels and storing them in warehouses as other platforms like Amazon predominantly do.
It should be good news for Amazon, who are much less reliant on cheap De Minimis duty -free shipments than rivals like Shein or Temu.
You know, I got to imagine there might be some unintended consequences for closing down this tax exemption.
We've been talking about these corporate giants, but will smaller, you know, maybe less flexible companies pay?
Well, De Minimis was originally designed to reduce the costs to small businesses and households for the various gizmos and widgets that they might need to buy from overseas to go about their daily lives or run their small businesses.
That's going to be much more difficult now.
A lot of people see this as part of an opening salvo in Donald Trump's trade war with China.
So whether that's the suppliers to Xi 'an and Temu, small factories, small businesses in China, or whether that's the platforms themselves, a lot of people are hoping that Xi Jinping and Donald Trump will get on the phone and hash out some sort of deal.
Will Langley is the FT's South China correspondent.
Thanks, Will. Thanks for having me.
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