Shein swings to $99m loss as Trump tariffs hit sales

Shein, the fast-growing Chinese-founded fashion retailer based in Singapore, reported a staggering $99 million loss in the first quarter of this year, marking a sharp reversal from a $395 million profit recorded during the same period last year. The loss is attributed largely to rising costs driven by U.S. tariffs and other factors, according to the company’s recent financial filing. The move comes amid ongoing trade tensions between the United States and China, though current negotiations have temporarily halted further escalation. The company cited the removal of an import duty exemption for small packages as a key factor behind the decline in sales. This exemption, known as the de minimis rule, allowed items worth up to $800 to enter the U.S. without tariffs. It was eliminated under a Trump-signed executive order effective 29 August 2025, which expanded previous measures targeting low-cost Chinese and Hong Kong imports. The policy shift disrupted the business model of online retailers such as Shein, which thrived on selling inexpensive clothing through direct-to-consumer platforms. In response to the new tariffs, Shein stated it is exploring multiple strategies to mitigate the financial impact, including raising product prices in the U.S. market. However, these efforts have yet to fully counterbalance the surge in operational costs. The company also noted that geopolitical instability, particularly the conflict involving Iran, contributed to reduced consumer demand and logistical challenges in certain regions. Additionally, a non-cash accounting adjustment related to special investor shares resulted in a $328 million paper loss, though this does not reflect actual cash flow. Despite these setbacks, Shein continues to expand its customer base. According to the latest filing, the company ended the first quarter with 281 million active users, up nearly 16% from the prior year, who collectively placed over one billion orders. This growth underscores the resilience of the brand despite the economic headwinds it faces. The financial disclosure coincides with Shein’s plans to go public in Hong Kong. On 10 July, the China Securities Regulatory Commission approved the company’s IPO following unsuccessful attempts to list in New York and London. While the filing did not specify the exact timing, valuation, or pricing of the upcoming offering, the approval signals a major step forward for the company as it seeks to raise capital amid challenging conditions. The decision to remove the de minimis exemption sparked debate among policymakers and industry leaders. The White House justified the move by stating that the exemption had been exploited to “evade tariffs and funnel deadly synthetic opioids” into the country. Critics, however, argue that the policy disproportionately affects legitimate businesses reliant on low-cost international shipping. In Europe, similar concerns led the EU to impose a €3 fee on low-value e-commerce imports in early July, aiming to level the playing field against perceived unfair advantages held by Chinese firms. As Shein prepares for its Hong Kong listing, the company faces a complex landscape shaped by shifting trade policies and evolving consumer behavior. Its ability to adapt to these changes will be crucial in determining whether it can sustain its rapid expansion and maintain profitability in the face of mounting regulatory and economic pressures. The company has not indicated any immediate plans to alter its core strategy, but analysts suggest that the ongoing trade disputes could influence future operations and investment decisions. With the global economy still navigating uncertainties, Shein’s path forward will depend heavily on how effectively it can navigate these turbulent waters while maintaining its competitive edge in the fast-fashion sector.