The Trump administration’s recent move to halt low-cost imports from entering the U.S. tariff-free is anticipated to impact fast fashion giant Shein more severely than its competitor, Temu. According to an analysis by Casey Hall at Reuters, Temu’s broader product range and strategic shift in their shipping operations offer a buffer against the new tariffs.

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Both Shein and Temu have experienced significant growth in the United States, leveraging the de minimis rule that exempts shipments under $800 from import duties. Recent estimates indicate these Chinese retailers are responsible for over 30% of all daily packages shipped to the U.S. under this provision. However, with tariff regulations tightening under scrutiny during the Biden administration, both companies began adjusting their strategies to become less reliant on the rule.

Temu, owned by PDD Holdings, has been swift in adapting by expanding its semi-managed model, a tactic akin to Amazon’s, which entails shipping goods in bulk to overseas warehouses rather than directly to customers. By last March, approximately 20% of Temu’s U.S. sales originated from local sellers’ inventories, based on estimates from e-commerce market research firm Marketplace Pulse. Furthermore, by year-end, half the goods sold by China-based Temu sellers to the U.S. were first sent to U.S. warehouses.

In contrast, Shein continues to depend heavily on air freight for the swift delivery of its fashion items, a necessity due to its business model focused on rapid trend responsiveness. Despite this, Shein has made efforts to diversify its supply chain, incorporating suppliers from Brazil and Turkey, potentially a proactive measure in response to anticipated regulatory pressures. The company also established operational centers in Illinois, California, and a supply chain hub in Seattle.

Trump’s executive order has thrown the express shipping sector into turmoil. Notably, the U.S. Postal Service reversed a recent decision to halt parcel acceptance from China and Hong Kong merely 12 hours after implementing the ban. Analysis from Nomura suggests a potential 60% decline in de minimis shipments to the U.S., impacting American consumers who might face higher costs on orders from Shein, Temu, and even Amazon.

According to IndexBox data, 1.36 billion shipments utilized the de minimis provision in 2024, marking a 36% increase from 2023. Despite predictions of significant short-term disruptions, analyst Rui Ma believes the nimble nature of China’s e-commerce firms means they are well-positioned to adjust swiftly and effectively to these changes. “I think there will be real impact, especially in the short term, but it is not catastrophic,” Ma stated. “China has the most competitive e-commerce operators and the most advanced supply chain. Short of a total ban or something crazy like that, I think they will be able to figure it out.”

Source: IndexBox Market Intelligence Platform