Trump’s Tariff Policy Impact: Orders in Guangzhou’s "Shein Village" Plunge by 80%

Photo: A taxi displays a back-to-school promotion ad for fast fashion e-commerce giant Shein. (October 18, 2024 / VOA)

[People News] – In recent years, Chinese cross-border e-commerce platforms have rapidly captured the U.S. and European markets with ultra-low prices, benefiting from local tax exemptions on low-value imports. However, as the U.S. tightens regulations on Chinese imports and considers adjusting tax exemption policies, China’s cross-border e-commerce industry is facing serious challenges. The Guangzhou processing hub, which once thrived on Shein orders, is now experiencing an 80% decline in orders, with many factories facing the risk of closure. Analysts suggest that uncertainty in U.S. trade policies may push China to focus more on the European market, particularly as trade tensions rise between the U.S. and Europe.

According to Japan’s Asahi Shimbun on Monday (March 3), former U.S. President Donald Trump’s consideration of ending tax exemptions on low-value imports, combined with increased tariffs on Chinese goods, has led to a sharp decline in U.S. and European orders for Chinese e-commerce giant Shein. The Guangzhou manufacturing hub known as "Shein Village," a crucial part of Shein’s supply chain, is now in crisis.

Guangzhou’s Shein Village is home to approximately 500 factories, primarily responsible for producing Shein’s orders for the U.S. and European markets. Despite Shein relocating its headquarters to Singapore, Guangzhou remains a key production base. However, recent trade policy shifts have placed immense pressure on local factories.

The Panyu district of Guangzhou, known for its garment-processing industry, has long supplied major Chinese cross-border e-commerce companies like Shein and Temu.

Shein Village Factories Struggling Amid Order Collapse

A recent Asahi Shimbun field investigation in Panyu revealed that this once-thriving garment processing hub, which had relied on Shein’s high volume of orders, is now facing unprecedented difficulties.

A 43-year-old factory owner with 10 employees expressed his frustration in late February, saying: "Last year, orders kept coming in non-stop, but now we have nothing. Shein’s orders have suddenly dropped to zero. The tariffs have had a massive impact."

Another 30-year-old factory owner described his workshop as nearly empty, with little to no work, saying that the business is already "half dead."

Additionally, a factory that invested over 1 million RMB last year to produce exclusively for Shein initially hired around 20 employees. However, due to the drastic reduction in orders, the company has already laid off half its workforce and may need to downsize further.

U.S. Tariff Policy Changes on Chinese Imports

On February 1, the Trump administration announced a 10% tariff hike on Chinese imports and considered revoking the $800 de minimis threshold, which currently allows low-value imports to enter the U.S. tax-free. However, on February 7, the White House announced a temporary pause on this decision, meaning the exemption has not yet been officially revoked. Despite this, uncertainty over trade policies has already shaken investor confidence in China’s cross-border e-commerce industry, further accelerating its decline.

China's Cross-Border E-Commerce Faces Multiple Challenges

The Guangzhou "Shein Village" relies on low-cost cross-border e-commerce orders for survival, but with weak domestic demand in China, these factories struggle to stay afloat. About 80% of the factories in this area depend on foreign trade orders, and now, with U.S. tariff policy adjustments, the European Union (EU) may follow suit. On February 5, the European Commission proposed eliminating tax exemptions for imported goods under €150, further exacerbating Guangzhou's Shein Village crisis.

Professor Tomoko Ako from the University of Tokyo commented in Asahi Shimbun that most workers in Panyu and other affected areas are migrant laborers without local household registration. As a result, if they lose their jobs, they will not receive government welfare or unemployment benefits, significantly impacting low-income workers.

Former Swedish European Commission Vice President Göran Lindblad has long criticized Chinese "down-market fashion," arguing that platforms like Shein and Temu circumvent Western regulations and lower prices at the cost of environmental and human rights concerns.

Impact on China’s Foreign Trade Industry

U.S.-based human rights lawyer Wei Shuiping pointed out that in 2023, Temu's app ranked first in downloads on the U.S. Apple App Store, demonstrating the deep penetration of Chinese cross-border e-commerce into the U.S. market. However, with the U.S. and EU likely to increase trade restrictions and tariffs, these e-commerce giants face more significant challenges. Foreign trade, investment, and domestic demand have long been considered the "three driving forces" of China's economy. But with the U.S. tightening trade barriers, China’s foreign trade enterprises, particularly manufacturing industries reliant on overseas markets, are the first to bear the brunt of the impact.

Wei Shuiping explained: "China’s economic pillars are investment, consumption, and foreign trade. Investment is struggling, consumption has stagnated, and with China’s fundamental manufacturing industry relying on exports, new U.S. tariffs will significantly impact China’s foreign trade. If this market is cut off, it will be devastating for many small businesses and manufacturers in China."

China May Shift Focus to the European Market

Wei also suggested that uncertainty in U.S. trade policy might push China to pivot toward the European market, especially amid growing trade tensions between the U.S. and Europe.

"The Chinese Communist Party (CCP) is quick to adapt, and it may now target the European market, attempting to mend relations with Europe to keep its economy alive. Europe must recognize that the CCP is a malevolent force and should not be allowed to grow stronger, as it poses a threat to the free world."

Tariffs Hit "The World's Factory," Affecting Chinese Livelihoods

Beijing-based political commentator and former "89 Artist" Ji Feng argued that U.S. tariffs expose the vulnerabilities of China’s "world factory" model, significantly impacting its economy and people's livelihoods.

"Tariffs are a fatal blow to China, affecting 50% to 80% of the population. The manufacturing sector is struggling, and workers have no choice—they just want to survive. China has no bargaining power and is left with nothing but internal competition."

Shein: From China to Global Expansion

Shein was founded in 2008 in Nanjing, Jiangsu Province, and relocated its headquarters to Guangzhou in 2015. It has since become a leading global fast-fashion e-commerce company, selling products in over 150 countries. By leveraging low prices and a vast product range, Shein quickly gained popularity among young consumers in Europe and the U.S.

However, tightening regulatory scrutiny and increasing concerns over environmental and labor practices have put Shein’s supply chain under immense pressure. To mitigate its dependence on the U.S. market, Shein has already relocated its global headquarters to Singapore and is expanding into Southeast Asia and other emerging markets.

(Source: Radio Free Asia)