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Netflix CEO Ted Sarandos often claims he loves movie theaters. He’d love films to have long healthy runs at the box office, but audiences don’t want that. They want to watch movies at home, and he’s going to listen to what the consumer wants. But is that actually what the consumer wants? The answer is, apparently, “not really.”

The latest example of this is “KPop Demon Hunters,” an animated movie musical quietly released on Netflix in June. Since then, it’s become a phenomenon, and just passed “Red Notice” to become Netflix’s most watched movie ever. A one-weekend sing-along special edition of the movie snagged the top spot at the box office. With the film readily available on Netflix at home, people still chose to go out and spend money for the collective experience of the movie theater.

Viewers also pushed Netflix to make “Happy Gilmore 2” available in theaters, but the firm only put it out at very few theaters and with zero publicity. Sold out theatrical showings of “KPop Demon Hunters” and people demanding “Happy Gilmore 2” are only the most recent examples of consumers clamoring for more streaming content on the big screen. They got a one-week theatrical run of “Glass Onion: A Knives Out Mystery” in 2022 which generated $15 million in box office.

Fellow streamer Disney granted its audience’s wishes by turning their “Moana” streaming series into a theatrically released film that ended up grossing over $1 billion worldwide. Will Netflix actually listen to its audience and give upcoming films theatrical releases? Despite all the extra millions of dollars it could bring in, all signs point to no because Sarandos says “driving folks to a theater is just not our business.”

REDMOND, Wash. (AP) — Police arrested seven people Tuesday after they occupied the office of Microsoft President Brad Smith as part of continued protests over the company’s ties to the Israel Defense Forces during the ongoing war in Gaza, organizers said.

Current and former Microsoft employees were among those arrested, said the protest group No Azure for Apartheid. Azure is Microsoft’s primary cloud computing platform, and Microsoft has said it is reviewing a report in a British newspaper this month that Israel has used it to facilitate attacks on Palestinian targets.

The protesters could be seen huddled together on a Twitch livestream as officers moved in to arrest them. The video showed another group assembled outside.

During a media briefing Tuesday afternoon, Smith said two of those arrested were Microsoft employees.

Eighteen people were arrested in a similar protest in a plaza at the headquarters last week. The group has been protesting the company for months. Microsoft in May fired an employee who interrupted a speech by CEO Satya Nadella, and in April it fired two others who interrupted the company’s 50th anniversary celebration.

The group’s demands include that the company cut ties with Israel and pay reparations to Palestinians.

The British newspaper The Guardian reported this month that the Israel Defense Forces had used Microsoft’s Azure cloud computing platform to store phone call data obtained through the mass surveillance of Palestinians in Gaza and the West Bank.

Microsoft has said it hired an outside law firm to investigate the allegations, but that its terms of service would prohibit such use.

“There are many things we can’t do to change the world, but we will do what we can and what we should,” Smith told reporters at a media briefing following Tuesday’s arrests. “That starts with ensuring that our human rights principles and contractual terms of service are upheld everywhere, by all of our customers around the world.”

Earlier this year, The Associated Press revealed previously unreported details about Microsoft’s close partnership with the Israeli Ministry of Defense, which uses Azure to transcribe, translate and process intelligence gathered through mass surveillance. The AP reported that the data can be cross-checked with Israel’s in-house, AI-enabled systems to help select targets.

Following The AP’s report, Microsoft said a review found no evidence that its Azure platform and artificial intelligence technologies were used to target or harm people in Gaza. Microsoft did not share a copy of that review, but the company said it would share factual findings from the further review prompted by The Guardian’s report when complete.

In the statement Tuesday, the protest groups said the disruptions were “to protest Microsoft’s active role in the genocide of Palestinians.”

SAN FRANCISCO (AP) — Chipmaker Nvidia will release a quarterly report Wednesday that could provide a better sense of whether the stock market has been riding an overhyped artificial intelligence bubble or is being propelled by a technological boom that’s still gathering momentum.

Nvidia become the first publicly traded company to surpass a market value of $4 trillion last month, and its stock price has gained another 13% since then to create an additional $500 billion in shareholder wealth.

The latest financial results are due out Wednesday afternoon. They have become a key AI barometer during the past two years because Nvidia makes most of the chips that power the technology in vast data centers at the center of the boom.

This summer’s run-up has continued Nvidia’s jaw-dropping rise from early 2023, when the company’s market value was hovering around $400 billion. That was shortly after OpenAI’s late 2022 release of its ChatGPT chatbot triggered the biggest craze in technology since Apple released the first iPhone in 2007.

While the technology industry has been the biggest beneficiary of the AI frenzy, it’s also been a boon for the overall stock market. The benchmark S&P 500 has gained 68% since the end of 2022, with AI fervor fueling much of the investor optimism.

But even amid the general euphoria, there recently have been murmurs about whether AI mania will prove to be an echo of the late 1990s dot-com boom that culminated in an excruciating stock market meltdown in 2000 that eventually drove the U.S. economy and plunged Silicon Valley into a funk that lasted several years before the tech industry began to thrive again.

Investors were recently spooked by a combination of an MIT report that said 95% of AI pilots fail and comments from OpenAI CEO Sam Altman floating the idea that the artificial intelligence market is in a bubble.

And by some metrics, the stock prices of tech companies at the AI are looking frothy. For instance, Nvidia is trading at about 40 times its future earnings, roughly double the rate that investors traditionally believe is a reasonable level. Meanwhile, the market value of Microsoft, another AI leader, is hovering just below $4 trillion, while the values of other fellow pacesetters Amazon, Facebook parent Meta Platforms and Google parent Alphabet currently range from $1.9 trillion to $2.5 trillion.

Nvidia is expected to post another quarter of robust growth for the May-July period of its fiscal year. Analysts surveyed by FactSet research predict Nvidia will earn $1.01 per share, excluding certain items unrelated to its ongoing business, which would be a 49% increase from the same time last year. The analysts anticipated Nvidia’s revenue would rise 53% from a year ago to about $46 billion.

Those gains reflect the financial tsunami flooding the AI market as the biggest players spend heavily to build and expand data centers needed to power the technology. Microsoft, Amazon, Alphabet and Meta are collectively budgeting more than $325 billion for investments in AI this year. With its dominant position in the AI chip market, Nvidia is reaping the benefits of that intense demand.

Even so, the trajectory of Nvidia’s growth has been tapering off. If analyst projections pan out, Nvidia’s revenue growth for its latest quarter will be significantly lower than the 122% increase it posted during the same period last year.

And Nvidia has also been losing business because of President Donald Trump’s trade war with China. Following a ban on its AI chip sales in China, which resulted in a $4.5 billion blow to its finances during its fiscal first quarter, Nvidia estimated that the restrictions would cost it about approximately $8 billion in sales in this during the past quarter.

Trump took the China handcuffs off of Nvidia earlier this month in return for a 15% cut of the company’s sales in that country — a compromise CEO Jensen Huang is expected to discuss with analysts while he shares his perspective on the state of the AI market on a call with investors.

Cracker Barrel said late Tuesday it’s returning to its old logo after critics — including President Donald Trump — protested the company’s plan to modernize.

In a post on its website, Cracker Barrel said it will retain its old logo, which features an older man in overalls sitting next to a barrel and the words “Old Country Store.”

“We thank our guests for sharing your voices and love for Cracker Barrel,” the company said in a statement. “Our new logo is going away and our ‘Old Timer’ will remain.”

The tempest over the logo began last week, when the company announced plans for a simplified design featuring only the company’s name. Lebanon, Tennessee-based Cracker Barrel, which has 660 restaurants in 43 states, made the change as part of a wider plan to modernize its restaurants and appeal to younger customers.

The chain’s sales have been slipping as it faces growing competition from breakfast chains and others. In its 2024 fiscal year, Cracker Barrel’s same-store sales, or sales at locations open at least a year, dropped 0.1% despite a 4.9% increase in menu prices. Same-store retail sales at its shops fell 5.5%.

But many protested the change. On Monday, Cracker Barrel put out an apologetic statement, saying it “could have done a better job sharing who we are and who we’ll always be.”

At that point, Cracker Barrel didn’t say it would change the logo, but said it would listen to its customers and keep many of the things they have come to love about the restaurant, like the rocking chairs on its front porches. The company said it would continue to honor Uncle Herschel — the older man in its logo, who represents the uncle of Cracker Barrel’s founder — on its menu and on items sold in its stores.

But the controversy continued. On Tuesday morning, Trump said via Truth Social that Cracker Barrel “should go back to the old logo, admit a mistake based on customer response (the ultimate Poll), and manage the company better than ever before.” Cracker Barrel’s shares rose after more than a week of declines.

By Tuesday evening, Cracker Barrel had made its decision and scrapped the new logo.

“At Cracker Barrel, it’s always been – and always will be – about serving up delicious food, warm welcomes, and the kind of country hospitality that feels like family,” the company said. “As a proud American institution, our 70,000 hardworking employees look forward to welcoming you to our table soon.”

Trump was among those celebrating the move.

“Good luck into the future. Make lots of money and, most importantly, make your customers happy again!” Trump said via Truth Social.

NEW YORK (AP) — Donald Trump has a message for critics who think turning the U.S. government into a major stockholder of Intel is a “socialist” move: More is coming.

“I will make deals like that for our Country all day long,” the president posted on Truth Social after critics piled on, adding later about future ownership stakes, “I want to try and get as much as I can.”

One possible target: defense contractors, whom Commerce Secretary Howard Lutnick told CNBC Tuesday were ripe for the picking given the U.S. government is a big customer.

Free-market conservatives were already wary of Trump’s tendency to interfere in corporate decision-making by, for example, telling Apple where it should make iPhones, or even demanding a cut of Nvidia’s sales of chips to China. But the Intel move is a startling defiance of Republican orthodoxy that says governments shouldn’t try to pick corporate winners and losers and risk messing things up as owners by rewarding executives for politically smart but financially stupid decisions.

The U.S. government is getting a 10% stake in Intel through the conversion of billions in previously granted government funds and pledges, making it one of Intel’s largest shareholders.

“If socialism is government owning the means of production, wouldn’t the government owning part of Intel be a step toward socialism?” Republican Sen. Rand Paul said in a post on X. “Terrible idea.”

Scott Lincicome, a Cato Institute trade expert, says Intel could end up making decisions now to please Trump even if they’re impractical, say, by going ahead with plans to open a long-promised chipmaking factory in Ohio. And even short-term gains from government ownership, such as more companies buying Intel semiconductors, will hurt business in the end by saddling those companies with inferior chips.

“Intel might simply gain customers from folks that are looking to stay on Trump’s good side,” he said. “But innovation requires ruthless competition, an endless drive for an advantage — and now they might accept a disadvantage because they need the political win.”

Many Republicans remained silent on the issue, prompting others to suggest they are free market hypocrites.

“For so many of my self-described true conservatives, you’re going to have to explain to me how this reconciles with true conservatism and true free-market capitalism,” Republican North Carolina Sen. Thom Tillis told CBS in an interview. “I don’t see it.”

Early last year, the Biden administration agreed to provide Intel with billions of dollars in funding under the CHIPS Act for it to build semiconductor manufacturing factories around the country, part of a plan to produce 20% of the world’s most advanced chips in the U.S. by 2030, up from zero at the time.

Trump argues that he got the Intel stake for free by converting $11.1 billion of funding into the equity stake. He also notes that Intel shares shot higher after he struck the deal Friday, handing a big win to U.S. taxpayers.

“I love seeing their stock price go up, making the USA RICHER, AND RICHER,” Trump posted Monday morning before the stock trading began. “More jobs for America!!! Who would not want to make deals like that?”

The price of Intel stock fell slightly both Monday and Tuesday, and investors have reason to be cautious.

In a filing to its investors after the deal was announced, Intel warned that it may lose overseas customers reluctant to buy from a U.S. government-owned business. The company has lost more than $22 billion since the start of 2023 after largely missing out on the frenzy surrounding artificial intelligence.

James Secreto, a former Biden administration official who helped hammer out the CHIPS Act grants, said a falling stock price is a big danger given Trump’s tendency to measure his success and failure by gyrations in the public market and his willingness to jawbone companies to do things to help him politically.

“The Trump administration now owns Intel’s success or failure,” said Secreto, former Commerce Secretary deputy chief of staff. “The next question is how far will the U.S. government go to defend its equity postion?

He called the Intel stock purchase a “bridge too far” even for Democrats who believe government help is needed occasionally.

“For the sake of national security, we still need Intel to win on performance, not politics,” he said.

That Trump would be labeled a “socialist” by members of his own party is ironic given that he has long wielded that term against his opponents.

Yet in some ways the Intel move fits a pattern.

Trump has erected the highest tariffs in decades, a trading strategy that his party has long rejected, and has tried to influence corporate decisions the GOP used to say were best left to business owners. In addition to telling Apple not to shift production to India, he has gotten Coca-Cola to change ingredients and warned Walmart not to raise prices.

There have also been a series of moves that will directly benefit or hurt the government depending on how businesses perform.

In June, Trump struck a deal approving Nippon Steel’s takeover of U.S. Steel in exchange for a “ golden share ” that essentially gives the U.S. government veto power to ensure national security interests are protected against cutbacks in steel production. In July, he spent $400 million of taxpayer money on MP Materials stock to make the U.S government the biggest owner in the Las Vegas rare earths miner. Then earlier this month came his deal with Nvidia and AMD to give the U.S. government a 15% cut of revenue from selling certain chips to China.

A White House official who spoke on condition of anonymity to describe internal deliberations said the deals with Intel, Nvidia, and U.S. Steel are seen as one-offs, necessary moves because the companies have outsized importance to the country’s national security. The source likened the deals to the government’s departure from free market principles when it limits American aerospace companies from selling fighter jets to countries like China.

Some conservatives aren’t buying it.

“This isn’t about funding innovation,” said influential conservative radio host Erick Erickson on Friday. “It’s a paradigm shift towards socialism.”

In addition to Lutnick’s comments about targeting defense contractors, Trump’s top economic adviser has also said hinted about what is likely coming next. He said the president is interested in setting up a sovereign wealth fund in which federal government would invest in an array of companies.

“There’ll be more transactions, if not in this industry then other industries,” said Kevin Hassett, the director of the National Economic Council.

One prominent politician did voice support for the Intel deal, but it more likely hurts than helps Trump’s cause with Republicans.

“Taxpayers should not be providing billions of dollars in corporate welfare to large, profitable corporations like Intel without getting anything in return,” said Vermont Senator Bernie Sanders, a self-described democratic socialist and Trump antagonist. “The taxpayers of America have a right to a reasonable return on that investment.”

———

AP reporter Michelle L. Price contributed from Washington.

SAN FRANCISCO (AP) — A group of book authors has reached a settlement agreement with artificial intelligence company Anthropic after suing the chatbot maker for copyright infringement.

Both sides of the case have “negotiated a proposed class settlement,” according to a federal appeals court filing Tuesday that said the terms will be finalized next week.

Anthropic declined comment Tuesday. A lawyer for the authors, Justin Nelson, said the “historic settlement will benefit all class members.”

In a major test case for the AI industry, a federal judge ruled in June that Anthropic didn’t break the law by training its chatbot Claude on millions of copyrighted books.

But the company was still on the hook and was scheduled go to trial over how it acquired those books by downloading them from online “shadow libraries” of pirated copies.

U.S. District Judge William Alsup of San Francisco said in his June ruling that the AI system’s distilling from thousands of written works to be able to produce its own passages of text qualified as “fair use” under U.S. copyright law because it was “quintessentially transformative.”

“Like any reader aspiring to be a writer, Anthropic’s (AI large language models) trained upon works not to race ahead and replicate or supplant them — but to turn a hard corner and create something different,” Alsup wrote.

A trio of writers — Andrea Bartz, Charles Graeber and Kirk Wallace Johnson — alleged in their lawsuit last year that Anthropic’s practices amounted to “large-scale theft,” and that the San Francisco-based company “seeks to profit from strip-mining the human expression and ingenuity behind each one of those works.”

WASHINGTON (AP) — Federal Reserve Gov. Lisa Cook will sue President Donald Trump’s administration to try to prevent him from firing her, her lawyer said Tuesday.

“President Trump has no authority to remove Federal Reserve Governor Lisa Cook,” said Abbe Lowell, a longtime Washington lawyer who has represented figures from both major political parties. “His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis. We will be filing a lawsuit challenging this illegal action.”

The case is likely to end up at the Supreme Court and could more clearly define the limits of the president’s legal authority over the traditionally independent institution. The Fed exercises expansive power over the U.S. economy by adjusting a short-term interest rate that can influence broader borrowing costs for things like mortgages, auto loans, and business loans. Trump, a Republican, has repeatedly demanded that Chair Jerome Powell and the Fed’s rate-setting committee cut its rate to boost the economy and reduce interest payments on the government’s $37 trillion debt pile.

If Trump succeeds in removing Cook from the Fed’s board of governors, it could erode the Fed’s political independence, which is considered critical to its ability to fight inflation because it enables the Fed to take unpopular steps like raising interest rates. A less-independent Fed could leave Americans paying higher interest rates, because investors would demand a higher yield to own bonds to offset potentially greater inflation in the future, pushing up borrowing costs throughout the economy.

Trump appointed two members of the board, Christopher Waller and Michelle Bowman, in his first term and has named Steven Miran, a top White House economist, to replace Gov. Adriana Kugler, who stepped down unexpectedly Aug. 1. If Miran’s nomination is approved by the Senate and Trump is able to replace Cook, he would have a 4-3 majority on the Fed’s board, which votes on all interest rate decisions, along with five of the Fed’s 12 regional bank presidents.

Legal experts say the Republican president’s claim that he can fire Cook, who was appointed by Democratic President Joe Biden in 2022, is on shaky ground. But it’s an unprecedented move that hasn’t played out in the courts before, and the Supreme Court this year has been much more willing to let the president remove agency officials than in the past.

“It’s an illegal firing, but the president’s going to argue, ‘The Constitution lets me do it,’” said Lev Menand, a law professor at Columbia University and author of a book about the Fed. “And that argument’s worked in a few other cases so far this year.”

Menand said the Supreme Court construes the Constitution’s meaning, and “it can make new constitutional law in this case.”

Bill Pulte, a Trump appointee to the agency that regulates mortgage giants Fannie Mae and Freddie Mac, made the accusations last week. Pulte alleged that Cook had claimed two primary residences -- in Ann Arbor, Michigan, and in Atlanta -- in 2021 to get better mortgage terms. Mortgage rates are often higher on second homes or those bought to rent.

The most likely next step for Cook is to seek an injunction against Trump’s order that would allow her to continue her work as a governor. But the situation puts the Fed in a difficult position.

“They have their own legal obligation to follow the law,” Menand said. “And that does not mean do whatever the president says. ... The Fed is under an independent duty to reach its own conclusions about the legality of Lisa Cook’s removal.”

The Fed has declined to comment on Trump’s effort to fire Cook.

Trump said in a letter posted on his Truth Social platform late Monday that he was removing Cook effective immediately because of allegations she committed mortgage fraud.

Cook said Monday night that she would not step down. “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” she said in an emailed statement. “I will not resign.”

The courts have allowed the Trump administration to remove commissioners at the National Labor Relations Board, the Merit System Protection Board and other independent agencies. Yet Cook’s case is different.

Those dismissals were based on the idea that the president needs no reason to remove agency heads because they exercise executive power on his behalf, the Supreme Court wrote in an unsigned order in May.

In that same order, the court suggested that Trump did not have the same freedom at the Fed, which the court called a “uniquely structured, quasi-private entity.”

The law that governs the central bank, the Federal Reserve Act, includes a provision allowing for the removal of Fed governors “for cause.”

“For cause” is typically interpreted to mean malfeasance or dereliction of duty by an official while in office, not something done before that person is appointed, Menand said.

To establish a “for cause” firing also requires a finding of fact, said Scott Alvarez, the Fed’s former general counsel and now adjunct professor at Georgetown Law.

“We know there’s allegations by Bill Pulte, but Lisa has not been able to respond yet,” Alvarez said. “So we don’t know if they’re true. Allegations are not cause.’’

Lowell said Monday night that Trump’s “reflex to bully is flawed and his demands lack any proper process, basis or legal authority,” adding, “We will take whatever actions are needed to prevent his attempted illegal action.”

Cook is the first Black woman to serve as a governor. She was a Marshall Scholar and received degrees from Oxford University and Spelman College, and she has taught at Michigan State University and Harvard University’s Kennedy School of Government.

___

Associated Press Writers Mark Sherman and Paul Wiseman contributed to this report.

WASHINGTON (AP) — Americans’ view of the U.S. economy declined modestly in August as anxiety over a weakening job market grew for the eighth straight month.

The Conference Board said Tuesday that its consumer confidence index ticked down by 1.3 points to 97.4 in August, down from July’s 98.7, but in the same narrow range of the past three months.

The small decline in confidence was in line with the forecasts of most of the economists who were surveyed.

A measure of Americans’ short-term expectations for their income, business conditions and the job market fell by 1.2 points to 74.8, remaining significantly below 80, the marker that can signal a recession ahead.

Consumers’ assessments of their current economic situation also fell modestly, to 131.2 in August from 132.8 in July.

While the unemployment and layoffs remain historically low, there has been noticeable deterioration in the labor market this year and mounting evidence that people are having difficulty finding jobs.

U.S. employers added just 73,000 jobs in July, well short of the 115,000 analysts expected. Worse, revisions to the May and June figures shaved 258,000 jobs off previous estimates and the unemployment rate ticked up to 4.2% from 4.1%.

That report sent financial markets spiraling, spurring President Donald Trump to fire Erika McEntarfer, the head of Bureau of Labor Statistics, which tallies the monthly employment numbers.

Another government report showed that U.S. employers posted 7.4 million job vacancies in June, down from 7.7 million in May. The number of people quitting their jobs — a sign of confidence in their prospects elsewhere — also fell.

More jobs data comes next week when the government releases its August job gains and June job openings reports.

The Conference Board’s report said that references to high prices and inflation increased again and were often mentioned in tandem with tariffs.

Other government data this month showed that while prices at the consumer level held fairly steady from June to July, U.S. wholesale inflation surged unexpectedly last month. Economists say that’s a sign that Trump’s sweeping taxes on imports are pushing costs up and that higher prices for consumers may be on the way.

The share of consumers expecting a recession over the next year rose in August to the highest level since April, when Trump’s tariff rollout began.

The share of survey respondents who said they intended to buy a car in the near future rose, while those planning to purchase a home remained stable after July’s decline.

Those saying they planned to buy big-ticket items like appliances fell, but there were big variations among product categories. Respondents who said they planned to take a vacation soon, either inside of the U.S. or abroad, also declined.

NEW YORK (AP) — Low-value imports are losing their duty-free status in the United States this week as part of President Donald Trump’s agenda for making the nation less dependent on foreign goods and resetting global trade with tariffs.

An executive order signed last month eliminates a widely used customs exemption for international shipments worth $800 or less starting Friday, nearly two years earlier than the deadline set in the tax cuts and spending bill approved by Congress.

Although the president previously ended the “de minimis” rule for inexpensive items sent from China and Hong Kong, having to pay import taxes on small parcels from everywhere else likely will be a big change for some small businesses and online shoppers.

Purchases that previously entered the U.S. without needing to clear customs will require vetting and be subject to their origin country’s applicable tariff rate, which can range from 10% to 50%. For the next six months, carriers handling orders sent through the global mail network also can choose a flat duty of $80 to $200 per package instead of the value-based rate.

In response, the national postal services of more than a dozen countries said they would temporarily suspend sending some or most U.S.-bound packages due to confusion over processing and payment requirements. Japan and Switzerland on Monday joined Australia, Austria, Belgium, Finland, France, Germany, India, Italy, Norway, Spain, Sweden, Denmark, Thailand, the U.K. and New Zealand in saying they would pause shipments.

The Trump administration says the exemption has become a loophole that foreign businesses exploit to evade tariffs and criminals use to get drugs, counterfeit products and other contraband into the U.S. Former President Joe Biden and members of Congress also discussed the issue.

Other countries have similar exemptions, but the threshold is usually lower. For example, 150 euros ($175) is the value limit in the 20 European Union countries that use the euro as their official currency. The U.K. allows foreign businesses to send parcels worth up to 135 pounds ($182) without incurring tariff charges.

In the U.S., the “de minimis” — Latin for lacking significance or importance — exemption started in 1938 as a way to save the federal government the time and expense of collecting duties on imported goods with a retail value of $1 or less. U.S. lawmakers eventually increased the eligibility cutoff to $5 in 1990, to $200 in 1993 and to $800 in 2015, according to the Congressional Research Service.

Since then, the number of shipments claiming de minimis treatment has exploded. A total of 1.36 billion packages with a combined value of $64.6 billion reached the U.S. last year, compared to 134 million packages sent under the exemption in 2015, the U.S. Customs and Border Protection agency reported.

About 60% of the 2024 shipments came from China and Hong Kong, according to an analysis logistics firm Flexport prepared based on U.S. government data. Multiple countries and regions accounted for the remainder, including Canada, Mexico, the European Union, India and Vietnam.

Proponents of limiting the exemption argue that it has served as a way for China-founded retail platforms like Temu and Shein to flood the U.S. with low-priced goods. The National Council of Textile Organizations said the move would help close a “backdoor pipeline for cheap, subsidized, and often illegal, toxic and unethical imports.” But some smaller American companies that rely on imported products and materials benefited from the exemption too.

Kristin Trainor is worried the end of de minimis will also mean the end of Diesel and Lulu’s, her 3-year-old boutique in Avon, Connecticut. Over 70% of the women’s clothes and accessories she stocks comes from small fashion houses in France, Italy and Spain. Trainor places small batch orders each week that fall under the $800 threshold.

“Our business model is to provide casual chic and unique clothes at affordable prices,” she said. “The added customs and duty charges that will go into effect on Aug. 29 will eliminate that affordability. ”

Trainor said she was looking to replace her European vendors with ones based in the U.S. But her bestselling product categories, such as apparel made of Italian linen, come from other countries. She estimates a simple linen sundress that cost $30 wholesale at the beginning of the year will rise to $43 next month.

After a corporate career, Trainor opened the store to have more time with her 9-year-old son and her 91-year old father. Raising the boutique’s prices to absorb part of the import charges would help offset higher shipping and logistics costs, but Trainor worries her customers will balk at higher prices.

“I have not made any official announcements to my customers just yet, although they have started to ask if I will stay open as they understand the economic impacts that are occurring,” she said. “At this point, I am leaning more and more towards closing the boutique, sadly.”

Ken Huening started CoverSeal, his business making and selling protective covers for cars, motorcycles, grills and patio furniture, in 2020. The company is based in Los Gatos, California, and the covers are manufactured in Mexico and China. When a customer places an order, it ships from Mexico.

Although a trade agreement that took effect in 2020 has made most goods from Mexico and Canada exempt from country-specific U.S. tariffs, the withdrawal of the de minimis rule applies to all countries.

Huening said he’ll either have to raise prices or end free shipping now that his products will be taxed when they are sent from Mexico to U.S. customers. He’s looked at setting up a U.S. production and logistics network but says domestic sewing facilities and textile manufacturers do not exist for the engineered fabric used in CoverSeal’s products.

“We are often asked why we don’t just establish a U.S. supply chain,” he said. “It is not possible in the short term. By the time the infrastructure is established, many companies and small businesses will be out of business.”

Shannen Knight imports hard-to-find sports goggles and glasses as the owner of A Sight For Sport Eyes, her online store and shop in West Linn, Oregon. She routinely received shipments from the U.K., the Netherlands and Italy that fell under the de minimis dollar cutoff.

Knight estimated that she would need to raise the retail price of the rugby goggles she gets from Italy by 50%. It took the International Rugby Board two years of testing to approve the Italian-made goggles, a specialty item without strong prospects for stateside production, she said.

“There are products that it just makes sense to be made internationally, where there is the stronger demand for them, but there still is some demand for in the U.S.,” Knight said.

Southwest Airlines will soon require travelers who don’t fit within the armrests of their seat to pay for an extra one in advance, part of a string of recent changes the carrier is making.

The new rule goes into effect Jan. 27, the same day Southwest starts assigning seats.

Currently, plus-size passengers can either pay for an extra seat in advance with the option of getting that money back later, or they can request a free extra seat at the airport. Under the carrier’s new policy, a refund is still possible but no longer guaranteed.

In a statement Monday, Southwest said it is updating some of its policies as it prepares for assigned seating next year.

“To ensure space, we are communicating to Customers who have previously used the extra seat policy that they should purchase it at booking,” the statement said.

It marks the latest change at Southwest, which had long been known for letting its passengers pick their own seats after boarding the plane, and for letting their bags fly for free, which ended in May. Those perks were key to differentiating the budget carrier from its rivals.

Southwest says it will still refund a second ticket under its new policy for extra seating if the flight isn’t fully booked at the time of departure, and if both of the passenger’s tickets were purchased in the same booking class. The passenger also needs to request the refund within 90 days of the flight.

If a passenger who needs an extra seat doesn’t purchase one ahead of time, they will be required to buy one at the airport, according to the new policy. If the flight is full, the passenger will be rebooked onto a new flight.

Jason Vaughn, an Orlando-based travel agent who posts theme park reviews and travel tips for plus-size people on social media and his website, Fat Travel Tested, said the change will likely impact travelers of all sizes. Southwest’s current policy helped create a more comfortable flying experience for plus-size travelers, he said, while also ensuring all passengers have adequate space in their seats.

“I think it’s going to make the flying experience worse for everybody,” he said of the new rule.

Vaughn described the change as yet another letdown for Southwest loyalists like himself, likening it to Cracker Barrel’s recent logo change that has angered some of the restaurant’s fans.

“They have no idea anymore who their customer is,” he said of the airline. “They have no identity left.”

The airline has struggled recently and is under pressure from activist investors to boost profits and revenue. It also said last year that it would charge customers extra for more legroom and offer red-eye flights.