Following the announcement of new tariffs that will take effect on May 2, Chinese fast fashion companies Temu and Shein are set to have their operating costs skyrocket. The companies have warned American consumers that the prices of products will rise from April 25 due to increased operational costs occasioned by the new trade policies.
President Donald Trump’s revised trade strategy affects China by proposing tariffs of up to 145% on imports and eliminating the de minimis rule that exempted products worth $800 or less from customs duties. That exception had been crucial to Temu and Shein because they leveraged direct-to-consumer shipment to become affordable brands, burdened by less regulation.
Shein and Temu pivot from U.S. markets
With the removal of that benefit, both firms will now incur import charges of 30% of either the item or $25, increasing to $150 per item in June. Trump’s most recent measure in response to the previous actions by China brought the upper limits to an all-time high of 245%.
In a customer notice, Shein confirmed it is “adjusting prices to reflect increased operating expenses” while assuring its shoppers that it will strive to “do everything to minimize the impact.” Temu has not come out publicly with figures, but logistics teams within the company have reported a severe downturn in the demand for orders from the United States.
“Due to recent changes in global trade rules and tariffs, our operating expenses have gone up. Until April 25, prices will stay the same, so you can shop now at today’s rates.”~ Shein
As competition continues to intensify domestically, both firms have greatly reduced their spending on advertising. Sensor Tower data shows that Temu cut its average daily advertising budget across Facebook, TikTok, and YouTube by 31% between March 31 and April 13.
Shein also cut down its advertisement spending by 19% through the same year, which had an impact on its visibility on markets such as Pinterest and Instagram. According to Tinuiti’s digital marketing director, Mark Ballard, Temu started reducing its Google Shopping ads on April 12.
Retailers eye Europe and Australia for growth to avoid Trump tariffs
The companies are reported to be thinking of diversification, given the expectation that the U.S market will slow down in its consumption. Mr. Jason Wong, the logistics coordinator at Temu in Hong Kong, revealed that the firm intends to extend its operations to Europe and Australia comprehensively.
Australia’s de minimis threshold of under $1,000 also helps make it an attractive option for fast-fashion retailers targeted by the U.S. tariffs. Wong also stated that the internal plan predicts a “significant drop” in the American sales volume in the coming months.
“We know for a fact that the demand from the US and North America will significantly decrease.”
~ Wong
The change in policy has also led to strategy adjustments in other countries that export commodities. More than 70 countries are already trying to adjust to the recent changes owing to tariffs between the U.S and China.
Trump’s renewed focus on trade negotiations was also seen during his recent meeting with Japan’s chief trade adviser, Ryosei Akazawa. While the objective of the talks used to be primarily related to trade and investment, Trump broadened the agenda and included issues related to the cost-sharing of American military defense.
Tariffs imposed by Trump have been rapidly increasing since the beginning of April of this year. He initially targeted the Chinese goods by putting a mere 20% tariff rate, which he later replaced with progressive rates of 34%, 50%, and 125% due to retaliatory tariffs declared by China.
The White House finally pointed out that all three layers of penalties equal 245% on Chinese imports. The administration said that this move was aimed at China despite continuing disrespect towards the American trade policy.
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