Shein shifts supplier production from China to Vietnam to avoid U.S. tariffs

The giant of fast fashion Shein is requesting some of its main Chinese suppliers to establish new production capabilities in Vietnam to avoid the tax penalty that Donald Trump imposed on products manufactured in China and sold on U.S. soil. We are specifically talking about the additional 10% tax that the United States government imposed on products imported from China, in addition to the elimination of the “de minimis” provision, which allowed duty-free entry for packages valued at less than $880 USD. This latter measure had the most impact on Chinese online retailers, such as Temu and Shein, which specifically base their business model on selling many products at very low cost. In fact, one-third of the de minimis shipments that arrived in the U.S. in 2023 came from China.

To encourage the transition, the company offers acquisition prices between 15% and 30% higher and guarantees larger orders. Additionally, it accepts longer production deadlines and offers assistance in the construction of facilities and in transporting fabrics from China to Vietnam. However, these incentives are temporary and will only cover the first months of operation of the new facilities.

Beyond trying to bypass the new tariff impositions, this production relocation also forms part of a wider strategy by Shein to diversify its supply chain. In recent years, the company has established supply lines in countries such as Brazil and Turkey, aiming to reduce its dependence on production in China and mitigate risks associated with trade and tariff policies.

Regulatory challenges in Vietnam

Despite efforts to expand in Vietnam, Shein faces regulatory challenges in the country, as Vietnamese authorities have required that foreign eCommerce platforms register with the government to operate legally. The failure to comply with these regulations has led to the temporary suspension of its operations in Vietnam. Shein is working to comply with the governmental requirements and resume its activities in the country.

The U.S. Penalty opens a new debate on current production models

Shein’s decision to diversify its production toward Vietnam and other countries reflects a trend in the fashion industry toward creating more resilient supply chains that are less dependent on a single region. This strategy enables companies to better adapt to fluctuations in trade policies and global market demands.

Furthermore, by establishing production capabilities in different countries, Shein—and other online retail platforms—can reduce delivery times and improve logistical efficiency, which results in a better customer experience. However, the company must carefully navigate local regulations and ensure compliance with the norms of each country to avoid disruptions in its operations, as has been the case here.

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