Full Breakdown
Shein Scales Back Vietnam Warehouse Experiment Amid Trade Shifts and Supplier Pull-back
8/10/2026, 5:50:14 AM
Vietnam Rollback and Site Reduction
Just over a year after leasing a 15-hectare bonded logistics hub near Ho Chi Minh City—size comparable to 21 soccer pitches—Shein is dramatically shrinking the operation. The lease now covers roughly 6 hectares, and a source familiar with the site says only about one-third of the original area is actively used. Mass layoffs began in April, with some teams retaining as few as 25 percent of their staff while others lost even more. A Reuters visit in late July observed only a handful of workers and a few trucks, while neighboring warehouses remained busy.
Trade Policy Changes and Tariff Impact
The first major blow came when the United States ended the de minimis duty-free exemption for shipments under $800 from all countries. President Donald Trump ordered the change on July 30, 2025, and it took effect a month later. The move eliminated the advantage that had allowed Shein’s low-priced Chinese parcels to enter the U.S. tariff-free. Although Vietnamese apparel faces lower base tariffs than Chinese goods—16 percent on a knit polyester dress versus an effective 33.5 percent after Section 301 duties—the gap narrowed further when both China and Vietnam were hit with new 12.5 percent U.S. tariffs for alleged forced-labour violations.
Supplier and Labor Constraints
Shein’s ultra-fast model relies on Chinese suppliers that can turn out millions of styles in tiny batches at margins as low as 1 yuan (?$0.15) per piece. “Sourcing diversification beyond China has practical limits, especially for companies like Shein whose competitive advantage depends on speed, flexibility, and extremely small production runs,” — Sheng Lu, professor of fashion and apparel studies at the University of Delaware.
Vietnamese workers willing to accept long hours at low wages have been scarce, prompting many factories to revert to China. A factory manager identified only as Wen (Guangzhou’s Panyu district) noted that despite lower U.S. tariff rates on Vietnamese goods, the lower efficiency made Vietnamese production less viable.
Reinvestment in China and Outlook
Guangzhou authorities warned Shein in mid-2025 against shifting orders away from the region, reflecting local concerns over job losses. In response, Shein’s CEO Sky Xu publicly pledged more than 10 billion yuan (?$1.5 billion) for a smart supply-chain system in Guangdong province.
Shein’s draft prospectus shows a 14 percent slide in U.S. revenue for the first quarter, attributed to the end of the de minimis exemption. Additional pressure comes from the European Union’s recent €3 duty on low-value e-commerce imports. Suppliers such as Ping He, who has worked in operations for Shein and TikTok Shop, report that many smaller partners are now supplementing income by selling on platforms like PDD, Temu, or Amazon.
“Shein's profit margins are just too thin … their order volumes are quite small, often just dozens of pieces at a time, which makes production a hassle. So we decided to drop them,” — Yang, manager at Jiang Gong Clothes, Panyu.
The combined effect of tighter U.S. trade rules, higher tariffs, labor shortages, and shrinking margins has driven Shein to refocus on its Chinese manufacturing base while its Vietnam experiment recedes.
