As U.S. trade policies face potential changes, Shein and Temu are working to reduce their reliance on Chinese manufacturing. The two eCommerce firms are exploring alternative production locations to avoid the financial impact of possible tariff adjustments. The uncertainty stems from discussions surrounding the de minimis exemption, which currently allows packages valued under $800 to enter the U.S. without tariffs. If revoked, this change could significantly alter cost structures for businesses that depend on direct-to-consumer shipments from China.
Earlier reports indicate that Shein and Temu have long leveraged the de minimis exemption to maintain competitive pricing in the U.S. market. Recent figures show that $46 billion worth of imports entered the U.S. under this exemption in 2024, with Shein and Temu accounting for nearly 30% of those shipments. The possibility of new trade restrictions has accelerated efforts by both companies to restructure their supply chains. Shein has previously expanded its supplier network to include manufacturers outside China, while Temu has taken steps such as raising prices and urging suppliers to store inventory in the U.S.
How Are Shein and Temu Adjusting to Trade Uncertainty?
Shein has been diversifying its supply network by building warehouses and sourcing products from multiple countries beyond China. This strategic shift aims to reduce dependency on Chinese factories and mitigate risks associated with unpredictable trade policies. Meanwhile, Temu is restructuring its approach by asking suppliers to maintain inventory within the U.S. to ensure product availability despite tariff concerns. More than one-third of Temu’s shipments to U.S. consumers now come from domestic inventory storage.
Will Tariffs Affect Shein’s IPO Valuation?
Shein has been considering adjustments to its valuation amid these trade developments. Reports suggest that the company might reduce its expected valuation for a potential London initial public offering (IPO) by nearly 25%, bringing it down to approximately $50 billion from its prior $66 billion valuation in 2023. This potential shift reflects concerns over how new tariffs could impact Shein’s cost structure and profit margins.
Temu has also been adjusting its supply chain management strategy, which could lead to price increases on its platform. The company is transitioning away from a model where it controlled key logistics aspects such as pricing, shipping, and marketing for its merchants. As a result, sellers may lose access to cost-saving benefits previously provided through Temu’s centralized system, leading to higher expenses that could be passed on to consumers.
The shifting trade landscape highlights the dependence of Shein and Temu on policies that have allowed them to offer lower-cost products. While both companies are actively seeking ways to mitigate potential financial setbacks, their ability to maintain competitive pricing in the U.S. remains uncertain. If tariffs are introduced, the strategies they adopt to offset increased costs—whether through localized storage, supplier diversification, or pricing adjustments—will shape their market positioning.
Consumers who rely on low-cost imports may experience price fluctuations as companies navigate these changes. Businesses that depend on direct imports from China could face similar challenges, prompting a broader shift in global supply chains. For Shein and Temu, the success of their strategies will depend on how effectively they adapt to evolving trade regulations while maintaining operational efficiencies.
