Temu and Shein, two leading online retailers known for offering affordable products, will increase their prices starting April 25 due to new trade regulations in the United States. Both companies have informed customers that these adjustments are essential in light of changing global trade policies. They have encouraged shoppers to take advantage of current prices before the increase occurs. This price adjustment is a direct consequence of an executive order from President Donald Trump, aimed at modifying the “de minimis” exemption.
Previously, this rule allowed companies to import low-value goods worth under $800 into the U.S. without incurring import duties. This exemption has significantly contributed to Temu and Shein’s swift expansion in the American market. However, beginning May 2, this exemption will be reduced. The implications of these trade policy changes extend beyond the U.S., affecting manufacturing regions in southern China as well.
In areas known as “Shein villages” in Guangzhou’s Panyu District, local suppliers are experiencing a downturn due to reduced order volumes. Factory owners and suppliers report that Shein has shifted production focus away from this area, opting for Vietnam as an alternative manufacturing hub. One factory owner noted that orders from Shein had declined by about 50% this year as production moves abroad. While expanding into Vietnam may help Shein retain shipping exemptions temporarily, the transition is not straightforward.
Companies accustomed to fast-paced design and delivery processes may struggle to adapt their business models and supply chains to new manufacturing settings. Experts indicate that this shift presents significant challenges, including potential increases in turnaround times and costs, which may ultimately be passed on to consumers. For factory owners like Mr. Li, moving operations to Vietnam poses substantial upfront costs and productivity challenges. He points out that production efficiency in China often exceeds that in Vietnam, leading some manufacturers to contemplate difficult decisions about their futures.
They may have to choose between bankruptcy or relocating their operations to Vietnam.