Talk about bad timing.
Why it matters. Shein’s model is based on ultrafast production in China with slim margins. The tariffs will force it to choose between raising prices—essentially giving up its huge appeal and competitive advantage—or assume the cost and see its margins, which aren’t big to begin with, reduced drastically.
The numbers. The company obtained approximately $13 billion in revenue from the U.S. last year, which represent more than a quarter of its $50 billion in global revenue. In 2024, Shein saw its U.S. revenue increase by 55% over the previous year.
The latest. The Trump administration has eliminated one of the key tariff exemptions for Shein’s business. Until now, the company could send products from China to U.S. customers without paying tariffs if the order was below $800. The rule was known as the “de minimis” exemption, which has been under threat since Trump was reelected.
Beginning in May, Chinese ships will be subject to a fixed $75 fee. It will increase to $150 in June.
Behind the scenes. According to Reuters, Shein is incentivizing its biggest suppliers to move their production to Vietnam to avoid the tariffs, although the company denies doing so. The company wouldn’t be the first to try to this route.
Some Chinese manufacturers that spoke to Reuters said that they had seen their orders drop by up to 50% since the Chinese New Year a few weeks ago.
- Several owners of factories in Guangzhou, an area known as a “Shein village,” confirm that the number of orders they’ve received has diminished.
- A manufacturer named Li, who’s been working with Shein for five years, said his orders have been halved.
Yes, but. Shein continues to grow in other key markets, such as:
- Germany (6.6% of its revenue)
- The U.K. (6%)
- France (5.4%)
- Spain (3.6%)
Now what? Shein now has to convince investors that it can maintain its business model and growth forecasts despite taking a hit in its main market.
Its IPO in London, which still needs to be approved by Chinese regulators, will be the ultimate test of the market’s confidence in its ability to adapt to the circumstances.
Amazon’s Response to the Rise of Temu and Shein: Haul, a Store Where Everything Is Under $20
The contrast. While Shein invests $1.3 billion in industrial projects in southern China, including a $500 million logistics center in Guangzhou, according to Reuters, it also appears to be diversifying its production towards Vietnam.
The Cut reports that Shein will implement “price adjustments” beginning on April 25, recognizing that “[d]ue to recent changes in global trade rules and tariffs, our operating expenses have gone up.”
Images | Zoe | appshunter.io
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