Temu, Shein face big U.S. tariffs. Don’t count them out, experts say

The closure of a trade loophole and prohibitive tariffs on China have upended Temu and Shein’s business model in the United States. And yet the e-commerce companies are likely to remain a dominant force in American online retailing, experts suggest.  

On Friday, the de minimis rule — a policy that had exempted U.S. imports worth $800 from trade tariffs — officially closed for shipments from China. This has seen Temu and Shein exposed to duties as high as 120% or a flat fee of $100, set to rise to $200 in June.

The small-package tariff exemption had been key to the companies’ ability to maintain budget prices on the merchandise they shipped from China. In the lead-up to its removal, prices of goods shipped directly from China on Temu and Shein surged, with Temu later ending direct shipments from outside the U.S. altogether. 

The change will be welcomed by many detractors of de minimis, among them U.S. lawmakers, labor unions and retailers, who have argued that Temu and Shein abused the exemption to undercut local businesses and flood the country with illicit and counterfeit products. 

But despite the new trade challenges that Temu and Shein face, e-commerce and supply chain experts told CNBC that the companies are still capable of competing with their rivals in the U.S. 

“Don’t count them out … Not at all. These kinds of Chinese e-commerce apps are very adept and agile. They have contingency plans in place and have taken the necessary steps to cover the tariffs from a margin perspective,” said Deborah Weinswig, CEO and founder of Coresight Research.

“I personally believe, if anything, [America’s e-commerce] game has been accelerating in favor of Temu and Shein … I wouldn’t be surprised if the competitiveness gap actually continues to widen,” added Weinswig, whose research and advisory firm works with clients across tech, retail and supply chains.

The loss of the de minimis exemption had long been anticipated, with U.S. President Donald Trump temporarily closing it in February. In preparation, Temu and Shein had been accelerating localization strategies for the U.S.

Scott Miller, CEO of e-commerce consulting firm pdPlus, told CNBC that Shein and Temu will continue to onboard goods from American sellers onto their apps to protect them from tariffs. 

“Many of the current sellers on Temu and Shein are located in China or countries nearby, but not all. Local U.S. companies have been joining these platforms at an accelerating pace … several of our clients have onboarded or began the process of onboarding in just the past few months,” he said. 

While margins for more localized brands and sellers will be lower on the platforms than those shipping directly from China, they can be competitive, according to Miller.

He added that in the case of Temu, vendors are attracted to lower fees, lighter competition and greater assistance with onboarding and setting up sales channels compared with what Amazon offers. 

In recent days, Temu, which is owned by Chinese e-commerce giant PDD Holdings, has begun exclusively offering goods shipped from local warehouses to U.S. shoppers.

Many of those goods are still sourced from China but then shipped in bulk to U.S. warehouses, according to experts. While these bulk items are subject to tariffs, they also benefit from economies of scale. 

This development is likely to see the variety of products on Temu scaled back, said Henry Jin, an associate professor of supply chain management at Miami University. However, he added, Temu is likely to resume direct shipments from China, depending on the outcome of the trade war between Washington and Beijing. 

Shein, meanwhile, has leaned into supply chain expansion, building manufacturing operations in countries such as Turkey, Mexico and Brazil, and reportedly plans to shift to Vietnam.

The company appears to still be shipping directly from China and likely has more room to absorb tariffs because of its “sky-high” margins in its core fast-fashion business, Jin said.

“If there’s one thing that Chinese companies are good at, it’s operating on a razor thin margin in an intensely competitive, if not adverse environment … they find every scrap that they can to survive,” he added.

Contingency plans aside, experts agree that Trump’s trade policy will continue to affect prices on Temu and Shein. The companies first announced they were raising prices in mid-April to counter tariffs.

According to data from Coresight, prices across shopping categories on Shein rose between 5% and 50% in the latter half of April, with the sharpest rises seen in toys and games and beauty and health. 

However, many…