Shein is moving! The worldwide known company is opening a logistics centre in Vietnam due to the increased taxes in the United States. This regulation on taxes comes from a trade war between China and the U.S.A. and it has affected many companies. That’s why Shein is looking to pay less when it comes to manufacturing clothes.
I’m sure you are aware of the existence of Shein, where you can buy almost anything you can imagine, but today we are going to learn what goes on behind the company.
What’s Shein? In case you have been living under a rock
Shein is a Chinese company known for selling clothes of all kinds online. It belongs to the fast fashion companies which are trendy now because they act as society needs, launching clothes everyday with low prices.
This company sells to almost every country in the world from the U.S.A. to Brazil to Spain among many others. So, the situation between China and the United States has a lot to do with Shein’s decision to move to Vietnam.
U.S.A. vs. China
Many years ago it started a trade war between China and the United States by imposing economic obstacles to each other such as the increase of duties, a price to allow a foreign product get into a country, and the creation of new rules to make business between China dn U.S.A. more difficult.
The Donald Trump government started this rise of duties to protect American companies from the over exposure to Chinese products.
‘De minimis exemption’
This concept may sound so weird, but it is one of the reasons why Shein has decided to send their products from Vietnam.Let’s explain what this is about.
‘De minimis exemption’ was a rule that allowed less than $800 packages coming from other countries not to pay duties. This was a good opportunity for companies like Shein to make the most of this option and sell as much as possible. However, this rule is over for products coming from China from April of 2024.
Disadvantages of this for Shein
As the Chinese company now has to pay now more duties for products sent to the United States, they have decided to increase the prices for deliveries to the U.S.A.
Of course, the company has experienced a drop on their sales between a 16% and a 41% which translates into almost half of their sales coming from the United States.
Shein is looking for solutions
The main response to the American regulations is to open a huge logistics centre in Vietnam where they will receive the clothes from other countries and then send them to the U.S.A. This is a clever move from Shein because they won’t have to pay those increased duties for Chinese products, as the products will be sent from Vietnam, not China.
This will mean a huge economic expense, but Shein considers it is necessary since that’s the only option if they want to continue earning money from selling clothes.
Shein is not the only company affected by these duties
Many other companies, not just clothes companies, are doing similar things in order to keep their businesses alive. They are trying to look for other countries that aren’t in conflict with the U.S.A. and also avoiding trading activities with China, so that they are not affected by Trump’s duties.
These duties are more negative than positive for every country. This decision limits companies when it comes to their manufacturing activities and their partner companies. In the end, each company will see what’s best for them no matter whether they have to move to other places or not, they will try all the possibilities to avoid paying more for their products. Do you agree with these duties?