Konrad Putsier (2:58)

This is good news for the economy. What it basically shows is that businesses and consumers were in slightly better shape in the second quarter than we thought they were. Consumer spending grew more strongly than we'd previously thought, and there's been more growth in business investment than people previously estimated. Particularly software investment grew at a faster pace than previously thought. Some economists think that has something to do with AI, which has basically been a big driver of economic growth in recent years and is really contributing to the economy. It's not a huge deal, this revision, but it still matters because basically everyone's trying to figure out which shape is the economy in. And what this basically means is that the economy is growing at a healthier pace than we thought, but it's still not growing very quickly. If you look at the first half of the year overall, the average growth is 1.4%, which is no fast growth at all compared to prior years. So this is not a booming economy by any measure. And the other thing to keep in mind is that this is the second quarter, which at this point is almost two months ago. It doesn't really tell us all that much about how the economy is doing right now, but it's still a good sign.

Alex Osolev (4:05)

The revised GDP numbers sent US markets higher, with the S&P 500 and the Dow hitting new closing highs today. The dow rose about 0.2%, the S&P 500 added roughly 0.3%, and the Nasdaq gained about 0.5%. The European Union said it will move to eliminate all tariffs on U.S. industrial imports and expand access for American farm products. It's part of an effort to shield European automakers from steeper duties on their exports to the U.S. the proposals follow a joint statement last week in which Brussels and Washington agreed to cut levies on European autos to 15% from a provisional rate of 27.5%. In return, the EU committed to lowering tariffs on a range of U.S. goods. Higher U.S. duties have rattled Europe's auto industry, with manufacturers from Stellantis to Porsche reporting sharp declines in recent sales. The measures will now go to other EU institutions for approval. Well, in other tariff news, starting tomorrow, even Americans small purchases from international shippers will be subject to tariffs. In July, the White House announced that it was suspending the de minimis provision, which allows shipments worth $800 or less to enter the US tariff free. The suspension will go into effect at midnight tonight for More on this, I'm joined by Esther Fung, who covers parcel shipping for the Journal. Esther, who will be paying these tariffs?

Esther Fung (5:33)

It depends. Actually. For a shipper or a merchant that's selling these items, when they bring these items to their carrier, they can decide whether they'll pay tariffs or they could also tell the carrier that it's the recipient who's going to pay the tariffs. The latter, it's called the delivery duty unpaid option. That option is not a great option for consumers who've been so used to getting all these packages to their homes without having to pay an extra tariff bill.

Alex Osolev (6:09)

Let's talk about that merchant side for a minute. So how are companies starting to respond to this already?

Esther Fung (6:15)

The larger companies, their customs brokers would probably already provide them processes and steps that they can take if they had inventory abroad, say in warehouses in Mexico or Canada. Some of them have already brought their inventory into the United States so that these items could be fulfilled domestically. And you don't have to deal with additional importance fees for the smaller businesses who don't have access to customs brokers or a lot of warehouse space in the US Some of them have said that they've just suspended selling to US Customers. For the smaller business, it's been a lot more chaotic for them.

Alex Osolev (6:54)

Let's say that I, a consumer, place an order for a $100 pair of sneakers online today. How might this de minimis provision affect what and how and when ultimately lands on my doorstep?

Esther Fung (7:08)

If you purchase from a retailer that has already figured this out, that retail likely would let you know online that the tariff is already paid, you're in good hands. That's the best case scenario for you. The worst case scenario would be when the package is on its way to you. You might get a notification from FedEx, could be UPS, could be DHL, that hey, you've got an import duty due and what the amount is and you might have to pay it online before they deliver the package to you.

Alex Osolev (7:43)

That was WSJ reporter Esther Fung. Thank you, Esther.

Esther Fung (7:46)

Thank you.

Alex Osolev (7:47)

Coming up, how Chinese money launderers are moving billions of dollars from Mexican drug cartels through US Banks. That's after the break.

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Alex Osolev (8:29)

The Treasury Department said today that Chinese money launderers appear to have moved as much as $312 billion in Illinois illicit transactions through U.S. financial institutions in recent years. Their goal was to aid criminals, including Mexican drug cartels. Chinese money laundering networks are now the dominant player in an illicit money services industry used by some criminal groups. And they're drawing scrutiny from the Trump administration. Reporter Dylan Tokar covers corporate crime for the Journal and is here now with more. Dylan, just briefly walk me through how this money laundering works.

Dylan Tokar (9:03)

Sure. So what's happening here? What's behind this money laundering activity is a black market for US Cash that's really being driven by people in China. In China, there are restrictions against how much money you can bring out of China. And there's a lot of wealth in China and wealthy people in China who are trying to get around those restrictions. So the way we've seen this work in the public cases that we've been able to look at is you have a drug trafficker selling drugs they've smuggled into the US the cash they make from those transactions, they then drop off with a Chinese money laundering network and then they're going to look for ways to launder it. And they have a few different ways to do this. One is to just take this money to a bank and deposit it there. They also oftentimes sell the cash directly to Chinese underground banking customers. The Chinese customer, they're actually paying for that money in China with Chinese currency. So cash doesn't actually have to travel across borders because there's these series of mirror transactions that allow value to be exchanged without ever having to cross a border.

Alex Osolev (10:14)

It sounds like a certain amount of this money is winding up in US Banks. Are they checking for this kind of thing?

Dylan Tokar (10:21)

So banks have obligations to screen for suspicious activity, generally speaking. And the anti money laundering regulator tries to give banks and other financial institutions indicators or specific types of crimes or typologies that they should be looking out for. And the Treasury Department's Financial Crimes Enforcement Network, also known as FinCEN, put out a big report about these Chinese money laundering groups. And it also put out an advisory that lists a series of red flags that banks should look for when they are screening transactions for suspicious activities.

Alex Osolev (11:02)

So the Trump administration is putting a little bit more scrutiny on this practice. What exactly are they doing about it?

Dylan Tokar (11:09)

These types of money laundering networks have been around for at least a decade. And the Trump administration isn't the first one to try to investigate some of this activity. But based on what we've seen in terms of the law enforcement priorities of the Trump administration, it makes sense that this would be something that would work its way up the list. They are very focused on Mexican cartels and the US Fentanyl crisis, and they're very focused on China in particular as well. And China plays a role in both manufacturing some of the precursors for fentanyl and also this emerging role as sort of a money laundering hub. So the Trump administration says it's going to prioritize investigating cases related to fentanyl related to drug traffickers in the Mexican cartels and related to Chinese money laundering groups, among a number of other things that they are saying are priorities for them.

Alex Osolev (11:58)

That was WSJ reporter Dylan Tokar. Thank you, Dylan.

Dylan Tokar (12:01)

Thank you.

Alex Osolev (12:05)

Russia launched a deadly barrage across Ukraine today. The large scale attack left at least 18 people dead, but the worst death toll in Kiev since Trump held talks in Alaska earlier this month with Russian leader Vladimir Putin. The strike, which hit Ukrainian civilian infrastructure and EU and British offices, was the clearest signal since that summit of Putin's desire to eschew Trump's peace efforts. Ukrainian President Volodymyr Zelensky called the barrage, quote, a horrific and deliberate killing of civilians. Kremlin spokesman Dmitry Peskov said today's strikes against Ukraine are successful and that targets are being hit, though Russia remains interested in peace talks. And that's what's news for this Thursday afternoon. Today's show is produced by Anthony Banci with supervising producer Michael Kosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.