Before Donald Trump's tariffs, Shein experienced a surge in sales, reporting over $400 million in revenue. However, the elimination of the de minimis rule and the implementation of tariffs may pose a threat to its future financial growth.
In the global e-commerce landscape, Shein, a popular fast-fashion retailer, is facing significant hurdles due to the elimination of the de minimis rule and regulatory changes.
The de minimis rule, which previously exempted low-value products sent to the United States from abroad from taxes, has been abolished, affecting Shein's operations and profitability. The rule, which was first eliminated for China and Hong Kong on May 2, 2025, and globally on August 29, 2025, has imposed new import duties and customs requirements on Shein's shipments to the U.S.
These changes have resulted in increased costs for the company. Shein now faces either a 54% ad valorem duty or a fixed duty per item on shipments to the U.S., drastically increasing costs and disrupting its supply chain.
Operationally, this has caused a sharp drop in low-value parcel volume from China to the U.S., with an 85% reduction in daily shipments post-May 2, 2025. The increased customs workload and compliance complexity have also been a challenge for the company.
Shein, which heavily relied on the de minimis provision to maintain competitive pricing, now must address higher tariffs, customs documentation, and potential border delays. This raises direct costs, reduces margin on low-cost items, and may force prices up or shipment volumes down, harming profitability.
Looking ahead, by July 1, 2027, the de minimis rule will be permanently repealed for all imports under the "One Big Beautiful Bill Act," ending nearly a century of duty-free treatment for low-value imports. This permanent change will codify the higher cost structure for Shein indefinitely, likely requiring strategic adaptation such as shifting sourcing locations, adjusting pricing models, or redesigning supply chain logistics to mitigate tariff exposure.
Shein's net income for the first quarter of the year increased over $400 million, reaching a total of $10 billion. However, new tariff regulations and the elimination of the de minimis rule could increase Shein's product prices, potentially reducing its competitive edge.
The company continues to keep its second quarter financial results private. There is a related news about new tax requirements for shopping on Shein, Temu, and AliExpress in Mexico.
Shein has suppliers in Vietnam, a country it planned to diversify its supply base to reduce dependence on China. The elimination of the de minimis rule applies to all countries from which Shein makes shipments, not just China.
In the past, consumers in the United States advanced their purchases to avoid future additional costs due to new commercial tariffs imposed by the Donald Trump administration. The elimination of the de minimis rule may result in future additional costs for consumers in the United States.
Trump has given Mexico another extension, suspending new tariffs for 90 days. This extension could provide a temporary reprieve for Shein and other retailers in navigating the complexities of the changing regulatory landscape.
Despite these challenges, Shein's valuation in 2023 was $66 billion. Regulatory and commercial pressures could potentially halve Shein's valuation, limiting future growth expectations and questioning its expansion plan.
In summary, Shein’s current operations suffer from increased import costs, customs complexities, and shipment slowdowns due to the staged elimination of the de minimis rule, which undermines its low-cost e-commerce model in the U.S. market. The permanent elimination by 2027 will lock in these challenges, pressuring Shein’s profitability and necessitating operational adjustments to sustain its competitive position.
- The abolition of the de minimis rule affects not only Shein's financial status in the business world, but also the general-news landscape, as other retailers facing similar challenges may need to adjust their strategies to cope with increased costs and customs complexities.
- In the realm of politics, the permanent repeal of the de minimis rule in 2027, as stated in the "One Big Beautiful Bill Act," will significantly impact the finance sector, with companies like Shein needing to strategically adapt to maintain their competitive edge and adjust their business models to mitigate tariff exposure.
