We have become accustomed to seeing hundreds of Shein and Temu hauls from thousands of influencers on all platforms. We have become accustomed to fast fashion and cheap prices. Shein, Temu and Amazon Haul entered our lives quickly: they offered novelty and variety at very cheap prices (and arriving home quite quickly), but now, these platforms that we know until now for being cheap could change forever, and that is because, President Donald Trump has closed the trade loophole that allowed packages to arrive in the United States without paying taxes.
What is this exception?
Chinese companies like Shein and Temu took advantage of a rule called the “de minimis” exemption, which allowed any order under $800 to enter tax-free. Now, without this benefit, the cost of many items could increase and shipments take longer to arrive at our homes.
And both companies have grown thanks to this exception, because you could buy everything from clothing to electronic devices without having to pay extra taxes.
Why has the US closed this exception?
Many retailers were already against this rule because they felt it gave an unfair advantage to foreign stores. At the 2023 Congress, it was revealed that 30% of packages entering the country came from China (and therefore did not pay the relevant taxes).
But that’s not all. To top it off, Trump also implemented new trade strategies, adding tariffs of 10% on China and 25% on Mexico and Canada.
How does this affect these companies?
Well, obviously, being the kings of bargains, this is going to be a hard blow. Juozas Kaziukenas, CEO of Marketplace Pulse, has confirmed that precisely, the elimination of this tariff was key for these companies to offer low prices and fast shipping. Now, with the change in regulation, the profit margin of these companies will be reduced and will probably end up affecting buyers in the form of much higher prices.
Aaron Rubin, CEO of ShipHero, points out that the elimination of this exemption could cut Shein and Temu’s margins by 5 percentage points. (And that’s even though these companies already operate with very low margins of between 10 and 15%
Will Amazon also be affected?
Amazon could also experience some changes to its Amazon Haul service, (one of the main competitors of Shein and Temu in the ultra-cheap product segment). But the impact on Amazon will be less because it does have a more diversified structure and they are lucky that on its website you can find the same products just at higher prices.
On the other hand, Gil Luria, an analyst at DA Davidson, believes that Amazon could benefit indirectly. “If Shein and Temu lose competitiveness, Amazon could gain customers who are looking for products at affordable prices, but with a greater guarantee of delivery,” he explained.
What can we do as consumers?
We will have to figure out how to take advantage of discounts within the platform or look for alternatives on other websites that offer similar products, or even buy in larger volumes to be able to reduce shipping costs, but we will have to see how all this develops to know what options buyers also have.
Because, let’s be honest, buying from one of these websites is almost a sport, we love filling our shopping cart with things we don’t really need just because they’re cheap. But, now everything is going to change, and with these changes it may not be so profitable to buy clothes at such cheap prices, what’s left for us? Look for local alternatives, Amazon (which is going to win from all this) or change our shopping habits. Do we really need to buy everything? For now, we can only hope that these two companies have an ace up their sleeve that allows us to continue buying clothes and absurd objects without spending a lot of money