Chinese Fast-Fashion Giants Will Leverage Tariff Pause To Flood US Market, Say Supply Chain Experts

The trade agreement between the U.S. and China, announced on Monday, offers a welcome reprieve for businesses on both sides and carries particular significance for cross-border Chinese e-commerce players like Temu and Shein.

The two platforms will use the 90-day period to bring in bulk shipments and restock their U.S. warehouses, according to a Reuters report, which cited inputs from trade experts.

"This is great for Shein and Temu, if nothing else, to replenish their U.S. inventory," Yao Jin, associate professor of supply chain management at Miami University of Ohio, told Reuters.

Instead of making individual shipments by plane, Shein and Temu are likely to ship products in bulk via container ship to the U.S. over the next 90 days to stock up ahead of the next possible tariff increase, said Jin.

Under the temporary truce, the U.S. will cut extra tariffs it imposed on Chinese imports last month from 145% to 30% for the next three months, while Chinese duties on U.S. imports will fall to 10% from 125%.

The agreement did not have an update on de minimis policy, which the U.S. discontinued on May 2. The exemption allowed goods worth $800 or less from China and Hong Kong to enter the U.S. without import duties and was widely used by Shein and Temu.

Citi upgraded PDD Holdings (PDD), which operates Temu, to a 'Buy' rating. It said it sees the "bigger-than-expected and sooner-than-expected" tariff reduction as a positive outcome for China's cross-border sellers.

Hugo Pakula, customs expert and CEO of trade automation platform Tru Identity, told Reuters that Shein and Temu could send some products directly to consumers from China and others via bulk shipments, depending on price.

"There are some commodities that are low enough value that you can add 30% to the retail price and it still makes sense as that would still be cheaper than Amazon or anywhere else," Pakula said.

Shein and Temu warned shoppers last month that costs would rise starting April 25, and had begun diverting their ad spending in the American market to Europe.

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