Shein Swings to $99 Million Quarterly Loss as US Tariff Shift Reshapes Fast-Fashion Landscape

Shein reported a loss of $99 million (£74.1 million) in the first three months of the year, a sharp reversal from the $395 million net income it recorded during the same period a year earlier. The Singapore-headquartered company, which was founded in China, disclosed the figures as part of its regulatory filing ahead of a planned initial public offering in Hong Kong.

The filing did not provide specifics on the size, pricing, or timeline of the IPO. However, the China Securities Regulatory Commission granted Shein approval for the Hong Kong share sale on 10 July, following unsuccessful attempts to list in both New York and London. The offering is expected to take place in the coming months.

A portion of the first-quarter loss — $328 million — stemmed from a paper loss tied to an accounting change involving special investor shares. These shares, which can be converted into ordinary stock at a later date, carry values that may fluctuate before the listing occurs.

Trump's Tariff Exemption Removal Takes Its Toll

A significant driver of Shein's declining performance was the elimination of a long-standing US import duty exemption. President Donald Trump signed an executive order that ended the so-called de minimis rule, which had allowed goods valued at $800 or less to enter the United States without any tariffs. The order took effect on 29 August 2025 and expanded an earlier measure that had specifically targeted low-cost products from China and Hong Kong to encompass the rest of the world.

The White House justified the move by stating that the global exemption was being exploited to "evade tariffs and funnel deadly synthetic opioids" into the country. American consumers had relied heavily on the de minimis provision to purchase inexpensive goods from online platforms such as Shein and Temu.

In its filing, Shein acknowledged the direct impact of the policy change. "The removal of the US de minimis exemption has had an adverse impact on our sales in the US and the overall growth of our net revenues," the company stated.

To cope with the increased costs, Shein said it is exploring multiple strategies, including raising prices for American customers. "In response to the increased duties and taxes, we are pursuing a wide range of options, including increasing our prices in the US market to offset a portion of the increased costs," the filing noted.

The broader context of US-China trade tensions adds another layer of uncertainty. The tit-for-tat tariff dispute between the two economic powers is currently in a paused state, though the situation remains fluid and unpredictable for companies operating across both markets.

Additional Pressures and Global Headwinds

Beyond US tariff policy, Shein pointed to other factors affecting its business. The company cited the Iran war as having negatively impacted demand, driven up costs, and caused delivery delays in certain markets. The filing did not specify which markets were affected or the extent of the disruptions.

Shein also faces regulatory pressure in Europe. Earlier in July, the European Union imposed a €3 (£2.56; $3.42) levy on low-value e-commerce imports. The trading bloc described the measure as a response to what it considers unfair competition originating from China, signaling that the scrutiny of low-cost online retailers is not limited to the United States.

Growth Amid the Challenges

Despite the financial setbacks, Shein's customer base continued to expand. The filing revealed that the company had 281 million active customers in the year ending 31 March 2026, representing an increase of more than 16% compared with the previous year. Those customers collectively placed over one billion orders during the period.

The figures underscore the tension between Shein's continued user growth and the mounting external pressures squeezing its profitability. As the company moves toward its Hong Kong debut, investors will be watching closely to see how effectively management can navigate a landscape shaped by shifting trade policies, regional conflicts, and increasing regulatory scrutiny across multiple jurisdictions.

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Source: BBC Business