Shein and Temu pivot to Europe as the US tariffs threaten fast-fashion fortunes

The fast-fashion e-commerce giants, Shein and Temu are recalibrating their global strategies as the US tightens its grip on low-cost imports. With new tariffs and the elimination of a critical trade exemption threatening their profits, both companies are aggressively expanding their digital presence in Europe and Latin America, according to Reuters.

In April, Shein increased its digital ad spending by 35 per cent in France and the United Kingdom, while China’s PDD Group's Temu upped its ad investments by 40 per cent and 20 per cent in the same markets, respectively. This marks a deliberate shift away from the US, where the recent end of the “de minimis” exemption has raised the cost of doing business. According to Reuters, this exemption had previously allowed packages valued under $800 to enter the country tariff-free as a loophole Shein and Temu had used to rapidly scale their business by shipping cheap products directly to American consumers.

As per Reuters, the withdrawal of this benefit came into effect on May 2 and has already begun reshaping digital ad trends. Both companies slashed their advertising in the US last month in anticipation of the policy change. At the same time, they’ve reportedly begun increasing prices to absorb the impact of new duties as a move that could hurt their appeal among cost-conscious American shoppers.

Singapore-based Shein and Temu were among the most aggressive ad buyers during the last holiday season, driving up digital ad bid rates as they fought to dominate the US market with ultra-affordable products like $12 dresses and $5 accessories. Their low pricing strategies had also disrupted legacy retailers such as Gap, H&M, Zara, and even US dollar stores.

While their European push includes markets like Germany, Italy, and Spain, the UK and France have seen the most pronounced uptick in advertising. According to Reuters, Shein downloads in the UK surged by 25 per cent last month, while Temu downloads more than doubled. However, daily app usage saw only modest growth, with Shein’s UK active user base rising 5 per cent and Temu’s by 10 per cent.

Year-on-year, Temu ramped up its UK ad spending by 20 per cent and an astonishing 115 per cent in France, while Shein saw a 100 per cent rise in the UK and 45 per cent in France, as per Reuters data from Sensor Tower.

The rivalry is also heating up in Latin America. According to Reuters, Shein boosted its ad spending in Brazil by 140 per cent compared to last April. The company, which manufactures locally in Brazil to better serve Latin American markets, is facing increasing competition from Temu, which is preparing for a formal launch in the region this June.

Reuters also reported that Temu’s Brazilian ad spending skyrocketed 800-fold year-on-year, following a playbook it used when it entered the US market in September 2022. As noted by Kara Lee, brand and digital analyst at Sensor Tower, "both companies appear to be employing similar market penetration strategies: spend aggressively, dominate visibility, and localize production".

The ramifications of these trade shifts go far beyond Shein and Temu. The broader US fashion industry is now bracing for a significant economic impact. The American apparel market projected to be worth $365.7 billion in 2025 which stands to lose up to $18 billion in revenue due to the elimination of the de minimis exemption and the broader tariff regime, according to an analysis by the National Retail Federation and Trade Partnership Worldwide.

As per data cited by eMarketer, retail apparel prices are expected to rise by at least 8 per cent due to retaliatory tariffs, and potentially as much as 17 per cent when all proposed duties are considered. These cost increases will likely hit low- to middle-income families hardest, particularly those who rely on affordable fashion options. While some US retailers may benefit from reduced competition; the immediate outlook remains uncertain. Supply chains are being restructured, logistics costs are climbing, and price-sensitive shoppers are becoming harder to retain all consequences of a global fashion market jolted by protectionist trade policies.