The European Union’s plan to impose import duties on low-priced goods could significantly impact fast-fashion giants Shein and Temu. Both companies, known for offering trendy clothing at rock-bottom prices, could face major challenges if the proposed tariffs come into force.
Currently, the duty threshold is €150 in the EU and £135 (€159) in the UK, which allows retailers like Shein to ship products directly from overseas to customers in those markets without paying import duties.
The new import tariffs proposed by the EU aim to provide a level playing field for European retailers who have to compete with the influx of cheap imports. Shein and Temu, which both rely heavily on low-cost production and lean, mainly China-based supply chains, have succeeded by bypassing traditional retail models and selling directly to consumers at minimal cost. This strategy has allowed them to dominate the fast fashion market in particular.
However, the introduction of import duties could thwart this business model. Higher tariffs would inevitably lead to higher consumer prices, which could undermine the competitive advantage that Shein and Temu have built up.
Furthermore, the new import tariffs reflect the EU’s general concern about ultra-fashion’s environmental and social impact. The fashion industry is one of the world’s biggest polluters, and the rapid sale of cheap clothing exacerbates waste and environmental degradation. By introducing tariffs, the EU wants to promote more sustainable consumption patterns and support local businesses that adhere to stricter environmental standards.
It will be crucial for Shein and Temu to adapt to these changes. They may need to consider alternative strategies, such as diversifying their supply chains, investing in more sustainable practices or finding ways to absorb some additional costs to remain competitive. Companies’ responses to these challenges will vary. For Shein, the new situation may also put the planned IPO in London on the brink.
