Why Shein has Turned to Vietnam to Sidestep Trump Tariffs

Shein is reassessing its supply chain strategy as US President Donald Trump’s crackdown on tariff-free imports threatens its business model.

The Chinese-founded, Singapore-headquartered fast fashion giant has relied on a trade loophole known as the de minimis rule, which allows goods under US$800 to enter the US without tariffs.

Following President Trump's move to scrap this exemption and introduce an additional 10% tariff on all Chinese imports, Shein is looking to Vietnam as an alternative manufacturing hub to avoid rising costs.

Shein sources products directly from thousands of Chinese factories, shipping low-cost fashion to customers worldwide.

However, with the tightening of US trade policies, the company is accelerating its efforts to diversify production beyond China.

Vietnam has emerged as a key location, offering competitive labour costs, established garment manufacturing infrastructure and access to free trade agreements that could mitigate the impact of US tariffs.

The shift aligns with a broader trend in the fashion industry, where brands are restructuring supply chains to navigate geopolitical uncertainties. Moving operations to Vietnam allows Shein to maintain its pricing strategy while ensuring smoother access to major markets like the US and Europe.

The company has not publicly commented on this transition, but analysts see it as a necessary step to sustain growth in the face of regulatory pressures.

IPO plans delayed amid regulatory challenges

Shein has been preparing for an initial public offering (IPO) and had initially set its sights on a London listing in early 2025.

However, sources familiar with the process suggest that the uncertainty surrounding US tariffs has led to a delay. The company, valued at US$66bn in its last funding round in 2023, had confidentially filed for a UK IPO last June.

The planned listing is part of a broader strategy to secure long-term investor confidence, but shifting regulations in key markets have complicated Shein’s timeline.

The brand has already faced hurdles with US regulators, leading it to explore London as an alternative. Despite these challenges, it continues to pursue UK regulatory approval while adjusting its operations to address tariff risks.

Florimond De Tinguy, VP of Sales at VTEX, explains the significance of Shein’s strategic shift: “When a brand is preparing for an IPO, it must navigate market-driven shifts, such as investor sentiment and regulatory changes

"However, some emerging factors, that were always possible, can signal a broader industry trend, prompting companies to reassess their timing and strategy. Shein’s decision to rethink its much-anticipated London IPO speaks to the drastic changes that tariffs have caused on the retail sector.

"Amid mounting pressure on its valuation, which many estimated fell from US$90bn to US$50bn in February, Shein’s decision to delay its UK listing is the starkest example yet of growing caution in retail," Florimond continues.

"The brand’s shift in focus from rapid expansion to strategic adaptability reflects a recognition that in today’s volatile environment, survival and long-term success depend on flexibility and foresight.”

Tariffs reshape fast fashion supply chains

Shein’s rapid expansion since the COVID-19 pandemic has been fuelled by the de minimis rule, which facilitated cost-effective shipping to the US.

A US congressional report found that more than 30% of de minimis shipments to the US came from Shein and its main rival, Temu, a discount e-commerce platform owned by PDD Holdings.

The US Customs and Border Protection agency estimates that over half of all de minimis shipments entering the US originate from China, with an average order value of around US$50.

Amid Trump’s push for tariffs, Shein and Temu face significant cost pressures. RBC Capital Markets analysts warn that removing the de minimis rule could threaten their business models and lead to higher prices for consumers.

While Shein has not abandoned its IPO plans, the company is prioritising supply chain adjustments to protect margins, reflecting a broader movement within the fashion industry, where brands are re-evaluating sourcing strategies to mitigate risks.

Shein’s expansion into Vietnam is part of a longer-term effort to ensure supply chain resilience and maintain competitive pricing amid geopolitical shifts. Whether this strategy will be enough to sustain its business in the face of mounting regulatory scrutiny remains to be seen.

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