How Shein And Temu Are Reacting To Trump Tariffs

Chinese companies like Shein and Temu, which had been exporting duty-free, cheap shipments to the US, are no longer beneficiaries of such an exemption.

As tariffs on Chinese goods are at a record high of almost 150%, Chinese retailers are the worst affected. While all efforts are being made by both Beijing and Washington to contain the damage to the supply chain, like reciprocal tariffs and a 90-day pause on duties by the US President, businesses are bound to suffer for the next few months. 

Chinese companies like Shein and Temu, which had been exporting duty-free, cheap shipments to the US, are no longer beneficiaries of such an exemption, as Trump signed an executive order earlier this month closing this trade loophole known as ‘de minimis.’ As per this order, any merchandise under $800 being shipped into the US will no longer be tax-free from May 2^nd. 

In retaliation, these online retailers are now slashing their US digital ad budgets, despite being two of the biggest advertisers on US social media. This comes as a major blow to tech companies like Meta, YouTube, etc. Shein, a fast-fashion brand, and Temu, an online marketplace, were popular among younger, thriftier shoppers in the digital space, who served as the target audience for these brands’ ads. 

According to Sensor Tower, which has tracked Temu’s advertising expenditures for the past month, the company’s daily average ads spend on social media sites like YouTube, Facebook, TikTok, X and Instagram has declined 31% compared to the previous month. Shein’s advertising budget was also constricted by 19% for the same period. 

Along with pulling ads, the retail brands will also raise costs in light of the de minimis revocation. In a statement, both companies have attributed the increase in operating expenses to the tariffs and trade tensions, due to which they are compelled to make price adjustments to avoid compromises in quality.  

The US is one of the largest markets for these companies, with Shein pricing dresses anywhere between $6 and $91 and Temu products oscillating between $2.48 and $210 online.  
A tariff charge of either 30% of the item’s worth or $25 per item would now apply to imports valued at or less than $800 that are sent through the postal system and from June 1, the rate would rise to $50 per item. 

Shein was reportedly selling over $30 billion worth of goods annually, having built its brand on cheap prices and making full use of trade-friendly policies and loopholes. However, with tariffs reaching the 145% mark, the company has come to terms with the reality that such robust trade will no longer be possible under the Trump administration. 

Like most Chinese manufacturers, Shien has also considered sourcing more from Vietnam in a bid to continue sending goods to Washington at lower tariff rates or without import duties, which still enjoys the de minimis clause; although there is no guarantee how much longer the provision will remain in place. However, industry analysts are pointing out that this could create a Catch-22 situation for Shien, as outsourcing to Vietnam could prove costly and time-consuming, both factors which are vital for the company’s business model. 

This poses quite the conundrum for the company, as raising costs will result in low demand, bringing down overall sales. However, Reuters has reported that Shein has confirmed in an interview with the news agency that rumours about the business shifting supply chain capacity out of China were untrue and stated that suppliers in China had in fact gone up from 5800 last year to 7000 this year. 

China and Hong Kong-based businesses will be the most affected by US tariffs, and while governments and businesses are working overtime to ensure the global recession is contained, this remains a Herculean task given that the slowdown has also crept into the international economy.