For years, Shein and Temu used a US tax gap to keep their costs low and to send objects to the country ultra.
No longer.
On April 2, US President Donald Trump signed an executive order to end the liberation of de Minimis -a rule that enables small packages worth less than 800 US dollars in the US tax -free packages from China and Hong Kong.
The DE -Minimis rule exists to prevent customs agents from spending too much time using small packages that do not deliver much money for the government in import taxes. But now the Trump government reverses the rule for imports from China and explains that the liberation has made it possible to get illegal drugs to get into the country.
Companies such as Shein and Temu, both of which were founded in China, used the rule to their advantage to send orders to the USA as individual packages instead of bringing shipping boxes full of articles, storing them in warehouses and distributing them from there, as most retailers do.
According to Samuel Rosco, a lecturer for supply chain and operating management at the Business School of the University of British Columbia, the exception is a large part of what Shein and Temus prices were so low.
The United States has ended the de-minimis tax exemption, which allows duty-free shipping of packages from China worth less than $ 800. As a result, Canadian companies that use Chinese materials could shoot the costs for them and their US customers.
“I would expect to score a significant goal but still try to take part in the United States,” said Rosco.
Although the price increases, the factors of the supply chain and a possible slowdown of the packages at the border are obstacles, experts say that the hits do not completely remove the companies, nor the quick fashion model that they have accelerated.
Price increases are already effective
From Friday on Friday, small packages of less than 800 US dollars will be made from China in the USA 120 percent or a flat fee of $ 100. The flat rate will increase to 200 US dollars from June 1st.
Assuming that the company passed on most or all this obligation to consumers, the costs for articles on Shein and Temus could more than double locations for Americans.
Both Shein and Temu already have announced Price increases due to tariffs that came into force last week. A Analysis by Bloomberg It found that in some cases the products on Sheins American terrain rose by up to 377 percent and an average of eight percent for women’s clothing.
Temu has also added “import fees” to objects of around 145 percent at its location. According to CNBC. The analysis shows that a US sound department in US dollars will now cost $ 44.68 after import fees.
Canadians will probably not find any price increases today, says Roscoe, since there are no changes to import regulations or obligations between our country and China. (In Canada there is a similar liberation in Canada for packages under 20, $ 40 or $ 150, depending on where the package is sent.)
At the time of writing, the prices for the Canadian websites of Shein and Temu seemed unchanged.
Despite the increased indictment in the USA, Rosco says that the Chinese e-commerce websites do not take this out of the game.
“Even if your prices rise by one and a half times, you are still competing with the retail stores in North America,” said Rosco.
He gives the example of a 10 -dollar bikini on one of the platforms that could cost around 22 US dollars after the tariffs have been received. Bikinis from H&M, Zara and Abercrombie are still much more expensive, which an average of $ 50, $ 80 and $ 120, which means that Shein and Temu still have space for the US market.
According to Sheng LU, an assistant professor for fashion and clothing studies at the University of Delaware, it is probably the most to lose the most. He says that basics such as T-shirts and socks could see the largest price jump because Staples buyers are likely to buy, even if they become more expensive.
In the past, the competition with Shein and Temu, according to LU, has also reduced prices to other fast fashion retailers. After the Chinese e-commerce giants increase their prices, LU could enable other brands to improve theirs without being afraid of losing customers.
Supply chain problems also a factor
According to Rosco and LU, the tariff and disappearing of the DE -Minimis gap also sets up a variety of supply chain problems for Temu and Shein.
While neighboring countries such as Vietnam and Cambodia in front of the tariffs that are far lower than China are, Lu, Lu says, simply not so easy to shift production to these other nations.
On the one hand, these types of shifts need a lot of time and money. According to LU, the companies will be unlikely to change where they will soon produce their products, since Trump’s tariff policy has so far been back and forth.
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He says that Chinese factories can also produce a variety of products and in small batches. Companies like Shein design a product and generally make a few hundred of them to see how well they sell before they do more. According to LU, Chinese factories will accommodate this practice, while factories usually have a minimum amount of 3,000 or 4,000 for orders elsewhere.
“They rely on factories in China, which are based on their very highly developed and integrated local supply chain to produce such products.
The new rule will probably also hinder how quickly products come into the country, says Lu. The de Minimis rule allowed this small packages below 800 US dollars if they avoid processing by border officers on arrival from China. But taking away the rule means that they are subject to all checks.
He says that around one million small packages come to the USA every day under de minimis, so that the additional workmanship could have an impact on how quickly people receive packages that consumers expect within a few days.
In order to compensate for the potential loss of business, Temu and Shein will probably push into other markets that do not have high tariffs – such as Canada.
“We will probably see many targeted advertising for Canadians,” said Rosco.
According to LU, this type of expansion will help, but adds that no retailer can realistically bear to lose access to the US market.
“We just don’t have any other market out there that can be so big and lucrative,” said Lu.
The US China trade war is in full swing, whereby no side shows signs of the back. Andrew Chang explains how China is positioned to absorb the shock of the US tariffs and what this global economic disorder could mean for their place in the world order. Pictures of Getty Images, the Canadian press and Reuters.
Sustainability gain? Think again
In view of the increase in fast fashion costs due to tariffs, some reports have pointed out that consumers could cause the resale market or buy less in general – which makes it a victory for sustainability.
According to LU, his gene Z-students (part of core demography for companies such as Shein) said that the price increases for cheap clothing would lead to buying less or shopping second-hand to avoid the tariffs.
However, the additional import taxes could actually tighten the current sustainability problems that Shein and Temu confronted, says Anika Kozlowski, assistant professor for design studies at the University of Wisconsin-Madison, the sustainable fashion. This could cause companies to even use cheaper inputs that tend to be less sustainable to keep the costs low, she says.
She says that the costs for clothing repairs could increase as parts such as buttons or zippers that are usually imported, also more expensive-a possible hit also on the second-hand clothing market. Although there are more demand and economic pressure in the shops from used hands, the sellers could also increase prices, which makes this sustainable option less desirable for buyers.
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Overall, Kozlowski says that the tariffs do not disturb the fast fashion because they do not deal with the basic cause-our wish for ultral stuff.
“We will still have a culture of consumption,” said Kozlowski. “This addiction does not break.”
She says that real solutions have to start there – just like Rosco.
Rosco says that Shein and Temu were charged the fast model that companies started like Zara in the late 1990s. While a quick fashion garment took months to switch from a concept to a real product, Shein can particularly turn into a new article in 25 daysThe hike of the clothing industry even faster than in the past.
According to Rosco, the slowdown of this pace would make efforts such as state legislation against wasteful and exploitative processes as well as the boycotts of brands that take part in these practices, as well as boycotts from consumers.
