Interview, Fireside Chat
Why US tariffs on China will hurt American shoppers
- Starting May 2nd, the removal of the de minimis exemption will subject American customers to tariffs and taxes on Chinese imports valued under $800.
- Shein and Temu will face significant business model disruptions, with the companies expected to pass tariff costs to consumers and diversify into markets such as Europe, South America, and Southeast Asia to survive.
- Diversification away from the United States presents operational challenges, given that Shein derives approximately 30 percent of sales from the U.S. market and Temu derives about 40 percent.
- Manufacturing relocation to countries like Vietnam or Cambodia will likely result in increased logistics and input costs for Chinese companies.
- The Chinese government, including the Ministry of Commerce and the Guangzhou administration, is expected to oppose and signal unhappiness regarding suppliers moving production outside China.
- The outlook indicates continued friction between China and the Trump administration over trade war tactics designed to prevent product rerouting through third countries.
- Long-term strategic shifts will transform Shein and Temu into more globalized multinationals by forcing increased sourcing and manufacturing outside of China.