Shein Faces Supply Chain Shift as U.S. Tariffs Pressure Chinese Factories

Shein, the ultra-fast fashion giant, built its $30 billion empire through low-cost production in Guangzhou’s “Shein villages” and favorable trade rules like the U.S. de minimis exemption, which allows low-value packages to enter duty-free. But rising tariffs and shifting strategies are now pressuring this ecosystem.

Factory owners in Guangzhou’s Panyu District report a sharp drop in Shein orders—some by as much as 50%—as the company encourages top suppliers to expand to Vietnam. Factory boss Mr. Li, who has worked with Shein for five years, noted production inefficiencies in Vietnam and said such a move isn’t viable for smaller manufacturers. “Here we finish 1,000 garments a day; in Vietnam, it takes a month,” he said.

Despite Shein’s official denial of shifting capacity, it admitted growth in Chinese suppliers, rising from 5,800 to 7,000. Still, local suppliers believe the push to Vietnam is real, driven by the need to avoid 145% U.S. tariffs and looming changes to de minimis eligibility for Chinese imports.

Experts warn that Shein’s model of rapid, small-batch manufacturing could suffer if production moves abroad, as both lead times and costs would rise. “You can’t replicate that speed and pricing elsewhere without changing the entire model,” said fashion professor Sheng Lu.

Shein’s $1.37 billion investment in South China, including a $500 million supply chain hub, suggests it’s hedging its bets. Yet, with mounting trade barriers and operational hurdles, many Chinese manufacturers face stark options: relocate or shut down. As the company eyes a London IPO, its global logistics choices could redefine its competitive edge—and the fate of thousands of Chinese garment workers.