The insight: Temu and Shein face an existential crisis as regulators worldwide chip away at the foundations of their operating models. Tariffs and the end of the de minimis exemption—in the US and other markets—are threatening to undo years of exceptional growth, despite strong interest for the retailers’ cheap and trendy product selection.

The US situation: The US, once a market of considerable opportunity, has become a major headache for Chinese ecommerce marketplaces.

• Now that the de minimis exemption has been eliminated, Temu and Shein orders are subject to the full weight of President Donald Trump’s China tariffs, which currently stand at 30% but were briefly as high as 120% for low-value parcels.
• Those costs have leveled the playing field, eroding the two companies’ competitive advantages while increasing the cost of doing business.

As a result, both Shein and Temu are losing steam.

• Shein’s observed sales fell roughly 8% YoY in September, the second-worst monthly performance in three years, per Bloomberg Second Measure.
• Temu’s US sales declined steadily throughout the summer, according to a separate Bloomberg report, exacerbated by the company’s decision to pull back US advertising and temporarily prevent Chinese merchants from selling directly to American shoppers.

The situation overseas: The global environment is hardly more welcoming as governments worry about Temu’s and Shein’s ability to undercut local businesses with ultra-low prices.

• Shein’s decision to open brick-and-mortar stores in France has spurred pushback from French retailers and government officials, who fear that the move could accelerate the decline of the local clothing manufacturing industry.
• The company temporarily paused sales in the country after authorities discovered "illegal firearms and child-like sex dolls" for sale on the site, per the Associated Press.
• Temu faces multiple EU investigations concerning product safety, counterfeiting, and potentially illegal pricing practices.
• Beyond Europe, South Africa and Japan have or are planning to introduce fees on low-value imports to curb Temu’s influence. South Korea recently fined the company 1.37 billion won ($100,000) for transferring shoppers’ personal data to China.

More countries are also considering anti-dumping measures to keep China from offloading ultra-cheap goods on their shores, which could hurt Shein’s and Temu’s ability to expand in new and existing markets.

The big picture: Temu and Shein built their businesses on charging lower prices that competitors couldn’t match. But that strategy only works if trade barriers are at a minimum—which is certainly not the case in the US, where the current effective average tariff rate stands at 16.8%, per Yale’s Budget Lab.

Rather than changing their business models, both companies are looking for other markets where they can grow quickly. That has resulted in notable short-term gains, with over 25% of the EU population making a purchase on Temu in the first six months of 2025—but leaves both platforms at the mercy of global trade policy.

• Shein at least is trying to diversify by selling access to its on-demand manufacturing network, which could entice brands looking to replicate the retailer’s speed and agility.
• But Temu is sticking to its guns. The company reverted back to its old playbook in the US as soon as it could, and is showing little inclination to evolve, despite the growing number of economic and geopolitical challenges.