Trump's Tariff Move Hits Shein, Temu Sales

The move by US President Donald Trump to eliminate the duty exemption for small parcels from China has sent shockwaves through the online retail market, significantly impacting sales of two major Chinese companies, Shein and Temu, Bloomberg reports. The two companies, known for their ultra-cheap goods shipped via small parcels, have experienced a sustained sales drop in the week following Trump's announcement.

Data from Bloomberg Second Measure, which analyzes credit and debit card data, reveals a sharp decline in US sales for both Shein and Temu. Shein's sales fell by 16% to 41% for the five days following February 5th, while PDD Holdings Inc.'s Temu experienced a drop of up to 32% during the same period.

While this decline is comparable to the traditional post-Christmas spending dip on these platforms, it represents a reversal of the growth trend seen in late January and has persisted through February 9th, the latest date for which data is available.

The pullback in spending began the day after Trump announced that parcels under $800 from China would no longer be exempt from customs duties, a category encompassing the majority of Shein and Temu's US shipments. Although the revocation has yet to be fully implemented, consumer apprehension regarding potential additional fees seems to be impacting purchasing behavior.

While seasonality, market competition, and broader macroeconomic factors may also be contributing to the sales decline, the two Chinese online retailers are actively seeking to mitigate the impact of the new US tariffs. Shein is reportedly encouraging some of its top apparel suppliers in China to establish new production capacity in Vietnam, while Temu is pursuing a "half-custody" framework to relinquish some control over its Chinese supply chain, according to earlier Bloomberg News reports.

Trump's new tariffs on China have already led to significant disruption and price hikes in the shipping sector. Following the removal of the "de minimis" rule, the US Postal Service initially announced it would no longer accept inbound packages from China and Hong Kong, only to reverse its position less than a day later. Trump subsequently announced that the implementation of the duty-free exemption removal would be delayed until sufficient systems are in place to collect tariff revenue.

The economic implications of this tariff policy are substantial. Nomura Holdings Inc. estimates that companies like Shein and Temu shipped $46 billion worth of small parcels to the US last year. The current uncertainty surrounding the tariff changes and their impact on the cost of goods is likely to continue to influence consumer spending and the strategies of these major online retailers.