Temu and Shein face major tariffs threatening their U.S. success

In the United States, the recent closure of the de minimis rule, which previously exempted U.S. imports worth $800 from tariffs, has greatly impacted companies like Temu and Shein. This policy change, which officially took place recently, exposes these e-commerce platforms to duties as high as 120% or a flat fee that will rise to $200 in the near future. This shift in trade policy has forced both companies to rethink their previous business models and pricing strategies. Previously reliant on the tariff exemption to maintain low prices for their products imported from China, Temu and Shein now face new challenges and must adapt to maintain market competitiveness. To counter this, both companies are accelerating localization efforts, including onboarding more products from American sellers, which allows them to navigate tariffs better even though margins for these localized products might be lower compared to those sourced directly from China. E-commerce experts emphasize that despite the increase in prices due to tariffs, these companies can still remain competitive against rivals like Amazon, as they typically offered products at much lower prices. Even with potential price increases, many goods on Temu and Shein may still be cheaper than offerings from American e-commerce sites. Economies of scale from bulk shipping may help mitigate some tariff impacts, but it's acknowledged that this shift could lead to reduced product variety on these platforms. In summary, the ongoing trade policies and tariffs pose tough challenges for Temu and Shein, yet experts believe that their agile supply chains, along with strategic adjustments in sourcing and pricing, will allow them to survive and possibly thrive in a transformed e-commerce landscape.