The spacer is either under or over the needle clip and gives another "1/2 clip" adjustment.
Also remember that the bike ships from the factory set to pass emissions testing. To do this the mid range is very lean.
You can dramatically change the 4T bike performance by raising the clip to the bottom (likely too far) or next to bottom position. The mid range is way fuller, smoother, and more powerful.
Jitse make a fantastic finger/wheel screw adjuster for the idle mix