Temu and Shein face massive tariffs. But don’t count them out of the U.S. e-tail scene, experts say
Photo illustration of the Shein app on the App Store reflected in the Temu logo.
Stefani Reynolds | Afp | Getty Images
The closure of a trade loophole and prohibitive tariffs on China have upended Temu and Shein’s business model in the United States. And yet the e-commerce companies are likely to remain a dominant force in American online retailing, experts suggest.
On Friday, the de minimis rule — a policy that had exempted U.S. imports worth $800 from trade tariffs — officially closed for shipments from China. This has seen Temu and Shein exposed to duties as high as 120% or a flat fee of $100, set to rise to $200 in June.
The small-package tariff exemption had been key to the companies’ ability to maintain budget prices on the merchandise they ship from China. Now that it’s gone, prices on Temu and Shein have been surging, with the former ending direct shipments from outside the U.S. altogether.
The change will be welcomed by many detractors of de minimis, among them U.S. lawmakers, labor unions and retailers, who have argued that Temu and Shein abused the exemption to undercut local businesses and flood the country with illicit and counterfeit products.
But despite the new trade challenges that Temu and Shein face, ecommerce and supply chain experts told CNBC that the companies are still capable of competing with their rivals in the U.S.
“Don’t count them out … Not at all. These kinds of Chinese e-commerce apps are very adept and agile. They have contingency plans in place and have taken the necessary steps to cover the tariffs from a margin perspective,” said Deborah Weinswig, CEO and founder of Coresight Research.
“I personally believe, if anything, [America’s e-commerce] game has been accelerating in favor of Temu and Shein … I wouldn’t be surprised if the competitiveness gap actually continues to widen,” added Weinswig, whose research and advisory firm works with clients across tech, retail and supply chains.
Contingencies in place
The loss of the de minimis exemption had long been anticipated, with U.S. President Donald Trump temporarily closing it in February. In preparation, Temu and Shein had been accelerating localization strategies for the U.S.
Scott Miller, CEO of e-commerce consulting firm pdPlus, told CNBC that Shein and Temu will continue to onboard goods from American sellers onto their apps to protect them from tariffs.
“Many of the current sellers on Temu and Shein are located in China or countries nearby, but not all. Local U.S. companies have been joining these platforms at an accelerating pace … several of our clients have onboarded or began the process of onboarding in just the past few months,” he said.
While margins for more localized brands and other sellers won’t be as high as those for China-based sellers on the platforms, they can be competitive, he said.
He added that in the case of Temu, vendors are attracted to lower fees, lighter competition and greater assistance with onboarding and setting up sales channels compared with what Amazon offers.
In recent days, Temu, which is owned by Chinese e-commerce giant PDD Holdings, has begun exclusively offering goods shipped from local warehouses to U.S. shoppers.
Many of those goods are still sourced from China but then shipped in bulk to U.S. warehouses, according to experts. While these bulk items are subject to tariffs, they also benefit from economies of scale.
This development is likely to see the variety of products on Temu scaled back, said Henry Jin, an associate professor of supply chain management at Miami University. However, he added, Temu is likely to resume direct shipments from China, depending on the outcome of the trade war between the U.S. and China.
Shein, meanwhile, has leaned into supply chain expansion, building manufacturing operations in countries such as Turkey, Mexico and Brazil, and reportedly plans to shift to Vietnam.
The company appears to still be shipping directly from China and likely has more room to absorb tariffs because of its “sky-high” margins in its core fast-fashion business, Jin said.
“If there’s one thing that Chinese companies are good at, it’s operating on a razor thin margin in an intensely competitive, if not adverse environment … they find every scrap that they can to survive,” he added.
Competitive prices?
Contingency plans aside, experts agree that Trump’s trade policy will continue to affect prices on Temu and Shein. The companies first announced they were raising prices in mid-April to counter tariffs.
According to data from Coresight, prices across shopping categories on Shein rose between 5% and 50% in the latter half of April, with the sharpest rises seen in toys and games and beauty and health.
However, many e-commerce experts remain confident that Temu and Shein will continue to prove price-competitive.
Coresight’s Weinswig said the two companies have previously been able to offer products at a third of the prices on Amazon for comparable goods. So, even if they more than double the prices to absorb the impacts of tariffs, many goods could remain cheaper than those on American e-commerce sites and retailers.
Jason Wong, who works in product logistics for Temu in Hong Kong, noted this dynamic when speaking to CNBC last month, likening Temu to a dollar store. If prices at the dollar store go from $1 to $2, it’s still a dollar store, he said.
Furthermore, Trump’s trade tariffs on China and other trade partners have also affected American retailers and e-commerce sites like Amazon.
Other advantages
When Forever 21 filed for bankruptcy protection earlier this year, it blamed Shein and Temu’s use of the de minimis exemption, which it said “undercut” its business.
But experts say that exclusively attributing the success of Shein and Temu to that trade loophole misses many of the other factors that have made them smash hits in the U.S.
According to Anand Kumar, associate director of research at Coresight Research, Temu and Shein owe a lot of their success to their very agile supply chains that adapt fast to consumer trends.
For example, Shein’s small-batch production — in which product styles are initially launched in limited quantities, typically around 100-200 items — allows it to test and scale products efficiently.
Another key is the companies’ applications, which use various strategies to maintain user interest, including frequent phone notifications, product recommendation algorithms and perhaps most notably, constantly displaying discounted prices from promotions and flash sales.
Temu was offering a “mega savings extravaganza” for American consumers on Monday. Some of the bestselling items on sale included stainless steel hook earnings for $1.45 and a fitted mattress pad for $11.54. It’s unclear if the discounted local goods were stockpiled before tariffs came into effect.
In addition, app users will often be met with mini-games that grant different coupons or ways to earn rewards, as well as opportunities to buy “mystery boxes” with assorted products.
That “gamification strategy” definitely plays into the consumer psychology of many U.S. shoppers who often buy items out of the excitement of being able to get a great deal, said Miami University’s Jin.
Experts also flagged that Temu and Shein have been very effective at marketing, including through the harnessing of livestreaming and social media.
On the other hand, according to Coresights’ Weinswig, American retailers have failed to adequately recognize threats from Temu and Shein and adjust their supply chains and pricing models.
U.S. President Donald Trump (L) listens as Nvidia CEO Jensen Huang speaks in the Cross Hall of the White House during an event on “Investing in America” on April 30, 2025 in Washington, DC.
Andrew Harnik | Getty Images
President Donald Trump on Monday said that he initially asked Nvidia for a 20% cut of the chipmaker’s sales to China, but the number came down to 15% after CEO Jensen Huang negotiated with him.
The comments came after news broke over the weekend that Nvidia agreed to pay the federal government a 15% cut in return for receiving export control licenses that will allow it to once again sell the H20 chip to China and Chinese companies. Nvidia’s Huang visited Trump in the White House on Friday.
“I said, ‘listen, I want 20% if I’m going to approve this for you, for the country,'” Trump said in a press conference in Washington.
Trump said that Nvidia’s H20 is an “old chip that China already has” and is “obsolete.” He compared the H20 chip to Nvidia’s current fastest artificial intelligence chip, which is called Blackwell, and said that he wouldn’t allow those to be sold to China without significant downgrades, such as a 30% to 50% reduction in performance.
“The Blackwell is super-duper advanced. I wouldn’t make a deal with that,” Trump said, adding that it was possible to make a deal for a “somewhat enhanced in a negative way” version of Blackwell.
“That’s the latest and the greatest in the world. Nobody has it. They won’t have it for five years,” Trump said.
One reason for the U.S. export controls is fear that providing advanced chips to China could allow the foreign power to leapfrog the U.S. in AI capabilities. Many have said that could pose a threat to the national security of the U.S.
Trump said that China already has chips with some similar capabilities to the H20.
Huang has said that it is better for U.S. national security if Chinese AI developers use U.S. technology, and that denying them access to Nvidia chips would actually encourage the Chinese chip industry to develop and catch up.
“He’s selling a essentially old chip,” Trump said. “Huawei has a similar chip.”
The H20 is a Chinese-specific chip that has had its performance slowed down. It is related to Nvidia’s H100 and H200 chips that are used in the U.S. The H20 was introduced after the Biden administration implemented export controls on AI chips in 2023.
In April, the Trump administration said it would require a license to export the H20 chip, and in May, Huang said that “effectively closed” the market off to Nvidia. Huang said that Nvidia was expecting to sell about $8 billion in H20 chips in the July quarter before sales were stopped.
“While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide,” an Nvidia spokesperson told CNBC on Monday.
Trump on Monday also said that Huang plans to visit him again to negotiate export licenses for the Blackwell chips.
“I think he’s coming to see me again about that,” Trump said.
A White House official confirmed to CNBC that AMD, the second-place AI chip maker, will also pay 15% to receive an export license for its China-focused AI chip, the Instinct MI308.
WATCH: Nvidia, AMD to pay U.S. 15% of AI chip sales in China to secure export licenses
After four previous scrubs or delays in a row since August 7th SpaceX launches Amazon KF-02 Kuipeer Satellites after the 5th attempt August 11th 2025 at 8:35 AM SLC-40 Cape Canaveral, Brevard County, Florida USA.
Scott Schilke| SipaUSA |AP
Amazon shipped another batch of internet-beaming satellites into orbit on Monday atop a SpaceX Falcon 9 rocket, after four previous launch attempts were interrupted by weather issues.
Monday’s launch is the fourth Kuiper mission, and Amazon now has 102 satellites in orbit.
The Falcon 9 rocket lifted off from Cape Canaveral, Florida, at 8:35 a.m. ET. Roughly an hour after launch, SpaceX confirmed all 24 of Amazon’s Kuiper satellites were successfully deployed.
The mission was originally scheduled for last Thursday, but SpaceX was forced to scrub the launch, along with three more attempts over the past few days due to rainfall.
For the second time, Amazon turned to Elon Musk‘s SpaceX, its chief competitor in the low-earth orbit satellite market, for help building out its constellation.
SpaceX’s Starlink is currently the dominant provider of low-earth orbit satellite internet, with a constellation of roughly 8,000 satellites and about 5 million customers worldwide.
Amazon is racing to get more of its Kuiper satellites into space to meet a deadline set by the Federal Communications Commission.
The FCC requires that Amazon have about 1,600 satellites in orbit by the end of July 2026, with the full 3,236-satellite constellation launched by July 2029.
Amazon has booked up to 83 launches, including three rides with SpaceX.
While the company is still in the early stages of building out its constellation, Amazon has already inked deals with governments as it hopes to begin commercial service later this year.
WATCH: Amazon launches first Kuiper internet satellites into space
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