Amidst Trump’s new tariff policy, brands and consumers alike are wondering: will imported e-commerce goods–especially those from Temu and Shein–remain cheap? The simple answer is no. But to really grasp the nuance of it, it’s important to understand how these companies operate and what impact economic policy will have.
Understanding D2C
To start, they rely on a direct-to-consumer model, meaning that they don’t use a third-party retailer to distribute their products. You’re buying straight from the manufacturer and thus able to get items for cheap. But plenty of companies operate with this model, like Allbirds and Alo, and they’re not even close in affordability to Shein.
Temu and Shein cut costs in other ways too. For example, they have extremely low marketing costs. They don’t spend tens of millions on ad campaigns like their competitors, but simply use influencer and referral incentives (Temu has basically gamified their platform) via social media. People like Lil Nas X and Addison Rae are top partners, clearly showing the company’s aptitude for the American market as well as its popularity amongst young audiences.
But it doesn’t stop there. Temu hosts bidding wars among a plethora of manufacturers every week to see who can give them the lowest price [5]. These companies order everything in bulk, dramatically reducing overhead costs. But they only order after they can confirm real-time demand. That’s how Shein releases upwards of 6,000 new designs every day and knows for a fact that people will buy them.
You might be questioning the 6,000 figure, but it’s real. The way they’re able to do this is via machine learning algorithms that optimize design production based on popularity, often by looking at what’s popular in other companies’ sales. The problem, though, is that this has gotten the company sued for infringing on designs from small designers like Krista Perry, Larissa Martinez, and Jay Baron, who sued in 2023 [2]. Temu’s AI analytics are even crazier, and that’s why huge privacy concerns have emerged – there’s an ongoing class-action lawsuit in Illinois [3].
These companies have other means of staying cheap, too, like the fact that they rely on underpaid laborers and use low-cost, environmentally hazardous (even toxic, in some instances) materials. A 2022 UK report revealed that Shein pays workers just $550 per month and even was found employing forced labor in multiple instances [4]. Fast fashion in general is environmentally harmful, but Temu’s methods are especially bad; the company relies entirely on air freight (30x worse than sea freight) and generates 4.8 times more packaging waste than alternative retailers [5]. The unfortunate reality is that these companies’ discounted products would not be so cheap without their unethical practices.
Section 321
Yet another operational tactic, and perhaps the most important one, that these companies use when exporting to their primary consumers in the US is the Tariff Act of 1930. Specifically, Section 321 of it allows imports under $800 to enter the country entirely tax-free, and has been exploited by e-commerce giants to avoid duties. These imports, known as ‘de minimis’ shipments, hit over $1.36 billion last year, and are the essential reason that Chinese fast-fashion giants can stay competitive with American firms like Zara and H&M [6]. The de minimis loophole has long been debated in the US, but most tariff policy changes have left it untouched. The current dilemma, though, is that President Trump has hinted that he plans to change it. As of right now, it’s still not clear whether President Trump will simply lower the de minimis amount or get rid of Section 321 entirely.
Regardless, the largest impact will be on consumers of Chinese-origin goods, which currently make up 64% of Section 321 imports [1]. Brands and consumers alike should be ready to pivot. With long-run supply chain shifts–whether it be sourcing from places like India and Vietnam, which aren’t being hit as hard as China and Mexico, or finding domestic alternatives–higher import costs always have a workaround. It’ll certainly be exciting to follow along and see how things unfold!
[1] https://www.loopreturns.com/blog/is-section-321-dead-navigating-tariff-changes-2025/
[4] https://www.slashgear.com/1398626/why-shein-marketplace-prices-are-so-cheap/
[5] https://www.greenmatch.co.uk/blog/environmental-impact-of-temu
[7] Image: Alamy Stock Photo / https://www.aarp.org/money/personal-finance/temu-vs-shein/