Garment workshops are shuttering across a Guangzhou district dubbed “Shein Village,” as the Trump administration’s move to scrap a tax exemption for small international shipments hits US-bound orders.
Panyu district’s narrow streets are lined with workshops, many of which supply Chinese fast fashion brand Shein. Piles of Shein bags, which arrive by mail to shoppers in the US, could be seen stacked in businesses that were open earlier this month.
“Orders from Shein have fallen this year, and our sales are down by a lot,” said a worker at one workshop that employs about 20 people.
US President Donald Trump has announced an end to the “de minimis” policy, which exempted international shipments with a retail value of USD 800 or less from US import taxes.
The move is seen piling pressure on China’s economy, which is already suffering from sluggish growth as its property market downturn drags on. Real economic growth remained flat at 5.4% in January-March quarter from the previous three months.
Online stores like Shein relied heavily on the de minimis exemption to woo American consumers with cheap products. But Trump’s trade policies have forced the company to adjust production plans, with suppliers bearing the brunt of the pain.
“Workshops have closed all over the place in just two months,” said Li Lianghua, a business owner originally from Hunan province. Li, who runs a workshop in a four-story building in Panyu, pointed to one such space nearby. Piles of half-finished clothing had been abandoned inside.
Shein has urged suppliers to relocate to Vietnam as a way to reduce the blow from Trump’s tariff plans. But smaller players do not have the resources to do so, leaving many with no choice but to shut down.
Half the nearly 20 Shein suppliers that operated out of the same building have closed. Li has stopped taking orders from Shein, shifting to direct sales on social media instead.
Manufacturers in Dongguan, a city about a 90-minute drive east from Guangzhou, face similar headwinds.
US companies had been reducing their China exposure even before Trump’s reelection in November. A Dongguan factory that makes bags and leather goods lost all of its contracts with four US customers by the end of 2024, losing USD 150,000 in annual sales.
“We have no prospects of winning new US contracts, so we have to give up,” said Liu Xiaodong, who took over the business from his mother in February. “There are only risks to doing business with the US now.”
Still, the factory made RMB 25 million (USD 3.5 million) in sales last year. Around 80% came from abroad, including from other Asian countries. Shipments to Japan, Singapore and other Asian destinations can be done faster and cheaper.
“We will double down on our business with Asia,” Liu said.
Chinese exports to the US increased more than 9% on the year in March in dollar terms, according to China’s customs authority, as businesses rushed shipments to get ahead of the new tariffs. But exports to the US are expected to fall starting this month, owing to total US tariffs of 145% on Chinese goods. Meanwhile, exports to Asia and Europe are seen picking up.
Deflationary pressures in China could spill over into other countries if more Chinese exporters start reducing prices to expand in markets beyond the US.
“Price competition in exports to Asia will intensify,” a Chinese manufacturing executive said.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.