Shein and Temu in Trouble as Trump Cracks Down
Shein and Temu may be suffering soon as the regulatory loophole they have enjoyed to keep costs low for shipping to the U.S. is now closed.
Quick overview
- President Trump is closing a loophole in customs regulations that allowed Chinese fast fashion brands like Temu and Shein to thrive in the U.S.
- The 'de minimis' loophole previously allowed goods valued up to $800 to enter the U.S. tax-free, contributing to $1.36 billion in low-value shipments in 2024.
- Starting now, packages worth $800 or less will incur a $100 flat fee or a 125% levy, with the fee increasing to $200 in June.
- This regulatory change may impact the stock prices of companies like Temu, while Shein, being privately held, remains unaffected by tariffs.
What President Donald Trump is calling “deceptive shipping practices” will be brought to an end with the closing of a loophole that allowed Temu and Shein to grow rapidly.
Since the 1930s, a loophole in customs and shipping regulations allowed travelers to bring with them goods valued as high as $800 USD without having to declare them or pay taxes on them. This was known as the “de minimis” loophole, which permitted fast fashion Chinese manufacturers like Temu and Shein to expand their markets into the United States with little cost to themselves.
The phrase “de minimis” is Latin for “of little value,” and it has allowed $1.36 billion in low value shipments in 2024 alone to make their way into the United States without any taxes being levied. That is all changing now, as Trump announced during the very first minute of Friday morning this week that he would be closing that loophole.
How does the government know that this regulatory allowance is helping Chinese companies do so well and even outperform American companies? The figures show that 60% of those shipments passing through the “de minimis” loophole are from China and that these imports accounted for 90% of all imports to the United States in 2024.
Trump Levies New Taxes
Starting today, all of those packages coming into the United States worth $800 or less will have to deal with a $100 flat fee or a 125% levy. In June that number will go up, with the flat fee rising to $200. This may be the first Christmas in a while that Shein does not dominate.
Shein is not publicly traded, so the company does not have to worry about the tariffs affecting their stock price. Temu is publicly traded under its parent company PDD Holdings Inc. (PDD), and their stock could be in serious jeopardy after this announcement. The stock price for PDD was up by 0.38% by the end of trading Thursday, but it could plummet as soon as the markets begin trading for Friday.
As Trump continues to conduct a trade war against China in the interests of the United States, companies on both sides will suffer initially. His plan is that U.S. companies and citizens will eventually profit, but they may have to go through a time of expensive tariffs and high shipping costs until things settle down.
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