Chinese e-commerce giants Shein and Temu are witnessing a sharp drop in US demand following the tightening of the “de minimis” import rule — a loophole that had previously allowed them to avoid import duties on small-value shipments. The change poses fresh hurdles for their business models in a competitive US retail landscape.
What Is the De Minimis Rule?
The de minimis threshold allows goods valued under $800 to enter the US without facing tariffs or customs checks. It had enabled direct-to-consumer e-commerce brands like Shein and Temu to ship low-cost products from China to American consumers at ultra-competitive prices — bypassing the higher duties paid by traditional retailers.
The US government has recently begun cracking down on the use of this loophole, especially for companies suspected of exploiting it at scale.
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Why Shein and Temu Are Affected
Unlike traditional retailers that rely on domestic warehouses or large-scale imports, Shein and Temu primarily use small parcels sent directly from China. This strategy, while efficient and cost-effective under de minimis rules, is highly vulnerable to changes in import thresholds or scrutiny by US Customs.
The crackdown has increased Shein’s and Temu’s shipping costs and forced them to reassess pricing and logistics — making their business less profitable and products less competitive in the US market.
Regulatory Pressure Mounts
US lawmakers have voiced concerns that the loophole undermines domestic manufacturers and enables tax avoidance by foreign firms. Recent bipartisan efforts have aimed to reform or eliminate the rule altogether. As scrutiny grows, Shein and Temu may need to shift more inventory to US warehouses, raising their overheads.
Meanwhile, traditional US retailers see the crackdown as a leveler, offering a chance to compete on more equal footing with foreign online platforms.
Investor and Market Reaction
While both Shein and Temu are privately held, the policy shift signals broader implications for global supply chains and US-China trade relations. Analysts suggest that US-listed companies relying on low-cost offshore logistics may face increased regulatory headwinds in the coming quarters.
Retail and logistics stocks showed slight volatility following early reports, although market impact remains limited for now.
What’s Next?
Analysts say Shein and Temu will need to reassess their fulfillment strategies, possibly moving toward regional hubs and absorbing higher costs to sustain US operations. This could either reduce profit margins or force price hikes — which may weaken their value proposition to price-sensitive American shoppers.
How they adapt could determine whether they sustain long-term growth in one of the world's largest consumer markets.
Source : CNBC – Shein, Temu see US demand plunge on de minimis trade loophole closure
