Shein faces pushback from Chinese government amid plans to shift production overseas

NANJING, CHINA: Fast-fashion giant Shein’s effort to shift part of its production away from China has faced pushback from the Chinese government, which is keen to prevent a manufacturing exodus amid former President Donald Trump’s increasing tariffs.

The Ministry of Commerce has reached out to Shein and other companies, urging them not to diversify their supply chains by sourcing from foreign countries, according to one source familiar with the situation. This communication reportedly occurred just before Trump’s announcement of “reciprocal tariffs,” prompting firms to explore ways to mitigate the impact of the duties. It is unclear which other companies were involved in these discussions.

In response, Shein has decided to cancel reconnaissance tours it had organized for major Chinese suppliers to visit factories in Vietnam and other Southeast Asian nations. Chinese officials are particularly concerned about potential job losses resulting from production moving overseas.

Neither Shein nor China’s commerce ministry has commented on the situation. Beijing’s intervention to halt Shein’s alternative supply-chain strategies comes as Trump’s trade measures challenge China’s status as a key export hub. With tariff exemptions for small parcels set to expire soon, the costs of products sold by Shein and competitors like Temu are expected to rise significantly, likely leading to higher prices for US shoppers who prefer these brands over Amazon.

This also highlights an intensifying divide between China and its exporters amid Trump’s ongoing trade pressures, as the government’s efforts to safeguard domestic manufacturing clash with companies striving to evade escalating costs.

While many Chinese firms managed to avoid tariffs during Trump’s first term by moving production overseas—evidenced by the fact that over half of Cambodia’s factories are Chinese-owned—the commerce ministry’s stance indicates that Beijing is less tolerant of such strategies this time around.

With a majority of Chinese goods facing an import levy of at least 54 percent on arrival in the US, suppliers are increasingly being pressured by clients to either absorb much of the tariff costs or consider relocating production to reduce expenses.

Shein says US tariff hit won’t stop fast-fashion flood

Earlier this year, Shein had offered incentives to some of its top apparel suppliers to expand production in Vietnam after Trump threatened to eliminate the “de minimis” tax loophole that allows Shein to ship products directly to US consumers without duties. This loophole will end for parcels coming from China on May 2, potentially costing merchants billions in additional tariffs.

Founded in Nanjing but now based in Singapore, Shein has depended heavily on southern China’s extensive garment manufacturing network to produce affordable clothing for consumers in North America and Europe. The looming tariff situation may pose a new challenge for Shein as it prepares for a potential share listing in London, with investors already pressuring the company to lower its valuation amid increasing scrutiny of its supply-chain practices and labour conditions.