Shein Rethinks Supply Chain as US Tariff Threat Looms

Shein is reshaping its supply chain strategy as US President Donald Trump moves to end tariff-free imports, putting pressure on its business model.

The Chinese-founded, Singapore-headquartered fast fashion giant has long used the de minimis rule, which allows goods under US$800 to enter the US without tariffs.

Now, with plans to scrap this exemption and impose an additional 10% tariff on all Chinese imports, Shein is looking to Vietnam to offset rising costs.

Shein sources directly from thousands of Chinese factories, relying on a fast-turnaround model to produce low-cost fashion for global markets. But with tightening US trade policies, the company is accelerating efforts to diversify production outside China.

Vietnam has emerged as a key alternative, offering lower labour costs, an established garment manufacturing sector and access to free trade agreements that could soften the impact of new tariffs.

The move reflects a wider trend in fashion, where brands are restructuring supply chains to manage geopolitical risks. By expanding into Vietnam, Shein aims to sustain its pricing strategy while securing easier access to key markets like the US and Europe.

Though the company has not publicly commented on the transition, industry analysts see it as a necessary step. The shift exposes the broader challenges faced by fast fashion brands, which rely on global supply chains to keep costs low.

IPO delayed as regulatory uncertainty grows

Shein has been preparing for an initial public offering (IPO), initially targeting a London listing in early 2025.

However, sources familiar with the process suggest that uncertainty over US tariffs has delayed these plans. The company, valued at US$66bn in its last funding round in 2023, had confidentially filed for a UK IPO last June.

The listing is part of Shein’s long-term strategy to secure investor confidence, but shifting trade regulations have complicated the timeline. Having already faced scrutiny from US regulators, the company turned to London as an alternative.

Despite these challenges, it continues to seek UK regulatory approval while adjusting operations to address potential tariff risks.

Florimond De Tinguy, VP of Sales at VTEX, explains the significance of Shein’s evolving strategy: “When a brand is preparing for an IPO, it must navigate market-driven shifts, such as investor sentiment and regulatory changes.

"However, some emerging factors, that were always possible, can signal a broader industry trend, prompting companies to reassess their timing and strategy. Shein’s decision to rethink its much-anticipated London IPO speaks to the drastic changes that tariffs have caused on the retail sector.

"Amid mounting pressure on its valuation, which many estimated fell from US$90bn to US$50bn in February, Shein’s decision to delay its UK listing is the starkest example yet of growing caution in retail.

"The brand’s shift in focus from rapid expansion to strategic adaptability reflects a recognition that in today’s volatile environment, survival and long-term success depend on flexibility and foresight.”

Fast fashion faces supply chain upheaval

Shein’s rapid growth since the COVID-19 pandemic has been closely tied to the de minimis rule, which has enabled cost-efficient shipping to US customers.

A US congressional report found that Shein and its main rival, Temu, accounted for more than 30% of de minimis shipments to the US.

According to US Customs and Border Protection, more than half of all de minimis shipments entering the country originate from China, with an average order value of around US$50.

With Trump’s proposed tariff changes, Shein and Temu face rising costs that could reshape their business models. Analysts at RBC Capital Markets warn that removing the de minimis rule could significantly impact both companies, forcing them to raise prices and rethink sourcing strategies.

While Shein has not abandoned its IPO ambitions, its focus has shifted to securing supply chain resilience. The move to Vietnam signals a longer-term effort to safeguard margins and maintain competitiveness.

Whether these adjustments will be enough to sustain Shein’s business in the face of mounting regulatory scrutiny remains to be seen.

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