New tariffs and the end of “de minimis” could spell the end of Shein and Temu’s business model in the US.
Both Temu and Shein, the fast-fashion e-tail and e-marketplace companies, have announced to their customers that price hikes are imminent. The reasons are two: a change in the “de minimis” policy of US customs and the imposition by the US of new tariffs on China.
The US accounts for 28 percent ($9bn) of Shein’s annual revenue, according to both Sacra.com and Statista, and accounted in 2023 for 43 percent ($14bn) of Temu’s worldwide gross merchandise value (GMV), according to ECDB.com.
“Due to recent changes in global trade rules and tariffs,” Shein writes, “our operating expenses have gone up. To keep offering the products you love without compromising on quality, we will be making price adjustments starting April 25, 2025. […] We’re doing everything we can to keep prices low and minimize the impact on you.”
Under the de minimis exemption, as we have reported, goods with a value of less than $800 could enter the US duty-free. The administration of US president Donald Trump is ending the exemption, issuing a series of Executive Orders to deal with it and with the famous reciprocal tariffs. The latest of these, dating to April 9, raises the ad valorem rate of duty for qualifying goods to 120 percent.
As the administration’s Fact Sheet of April 2 recounts, the changes to the de minimis policy go into effect on May 2.
Although both have Chinese roots, neither Shein nor Temu is headquartered in China. Shein, founded in Nanjing, has been headquartered in Singapore since 2022. Temu, though under the ownership of China’s PDD Holdings, is headquartered in Dublin and operates in the US through a subsidiary registered in Delaware. That said, the goods of both companies tend to be manufactured in China and depart for the US from there.
The app angle
Temu shut off its Google Shopping ads in the US on April 9 and has since seen its App Store rank plummet in the US, according to Mike Ryan, Head of Ecommerce Insights at Starter Ecommerce.
Ryan was clued in to this by an entrepreneur called Juozas Kazuikénas, who notes on his LinkedIn that he advises a number of companies (Quartile, Heyday, Fortunet, SellersFi). Writes Kazuikénas: “6 of the top 11 most-downloaded shopping apps in the US right now are Chinese marketplaces for buying directly from China. As the White House tries to reduce Chinese imports, the people want to increase them. Some of those apps are short-lived trends sparked by TikTok, unusable for consumers or without an English translation, others are the usual suspects hanging on while tariff-free shipping is still in place.”
According to Ryan, Temu has long maintained a tight relation between its ad spend and its app rank. “Temu’s impression share, which is the amount of ad impressions they receive compared to the amount of impressions they are *eligible* to receive, collapsed until Temu stopped appearing in advertisers’ auction data altogether on April 12th,” Ryan writes on LinkedIn. “Now we see the large degree to which advertising – not organic demand – is propping up Temu app installs. Temu cannot turn off ads for even ONE DAY without grave consequences.”
Ryan goes on to say that Temu is known to lose money on its orders, thanks to the financial backing of its parent, PDD, which has been trading revenue for market share. “Tariffs combined with crackdowns on de minimis import loopholes have all but murdered Temu’s manufacturer-to-consumer model” – by threatening to raise the loss on every order to an intolerable level.
Ryan is perhaps drawing from a story published in 2023 by Wired, which reckoned that Temu’s supply-chain costs were generating a loss per order of $30 on average. Wired said it had a company insider to confirm this, cited calculations by China Merchants Securities that Temu was losing 4.15 to 6.73 billion yuan renminbi ($588 to $954 million) per year, and claimed further that Temu was “squeezing small manufacturers in China, pressuring them to cut prices to levels that make it almost impossible to turn a profit.
Among shopping apps in the US at present Shein and Temu rank, respectively, ninth and tenth for the iPhone and fifth and fourth on Google Play.
