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But a sole reliance on U.S. warehouses is unlikely to be in the cards for Temu, Ben Tzion and Juozas Kaziukėnas, former CEO of Marketplace Pulse, said.

“This is absolving some pain, but it ultimately doesn’t remove all of it,” Kaziukėnas explained.

That’s because, whether or not goods are physically located in U.S. warehouses, they are likely still made in China and thus, have China listed as their country of origin. When sellers import these goods, they’d still be subject to applicable tariffs on Chinese goods—which means Temu and its sellers aren’t averting the added costs of bringing these items into the U.S.; they’re simply expediting the speed to consumers’ doorsteps and bypassing the added hassle of waiting for a low-value package to clear customs.

Ben Tzion said that cost increase, paired with how Temu has operated to date, leave him skeptical over whether Temu’s U.S. warehousing play has legs.

“The fact that you have a storage facility or a logistics ecosystem that can absorb some stock does not make you immune. It just makes you a bit more tolerant,” Ben Tzion said. “So in the short term, you may be able to sustain such shocks, but in the long term, if measures like the 10 percent tariff [on Chinese goods] stay in place, Temu is in trouble.”

If President Trump’s tariffs on China and the death of de minimis do remain intact, low-cost marketplace retailers could be stuck trying to keep prices low while maintaining some semblance of profitability.

For Temu, that might happen by absorbing some of the cost of the tariffs, rather than passing the entire cost on to the consumer—at least at first.

“One area they are probably going to try to figure out is what is the right level of subsidizing prices of products to reduce the impact of paying tariffs, and thus make the perceived price increase smaller, at least in the short term, and then perhaps reduce it over time to catch up on everyone else,” Kaziukėnas said.

Temu did not return Sourcing Journal’s request for comment.

Shein’s on-demand manufacturing structure

While Temu structured its business around being a marketplace, Shein first sold only its own products. It has since expanded its model to include other brands’ goods, as well as a marketplace that allows myriad sellers to hawk their wares.

But because of the way Shein’s initial business was set up, it’s reliant on on-demand manufacturing. That means, in many cases, items get shipped directly from the manufacturer to the consumer’s doorstep—in many cases, via air cargo.

So much of Shein’s infrastructure has been set up in China, which, in the case of a disruption like USPS, means consumers’ packages could spend lots of time held up at customs.

“Shein has perfected their ability to quickly complete the cycle of design, produce, ship, sell, feedback, optimize. Suspension of service like [USPS], or any disruption to service, is dramatically impacting the economics of such cycles. It cannot be absorbed by stock and storage, because Shein’s business model is not driven by having stock and having things in storage,” Ben Tzion said.

Shein does have a U.S. supply chain facility in Seattle, though it’s not obvious how it uses that facility or whether it stores large amounts of inventory there.

Kaziukėnas said it’s unlikely that Shein can copycat Temu’s play to slide into U.S. warehouses en masse—mostly because it doesn’t hold high levels of inventory like its competitor does.

“Shein, it doesn’t have the same capacity to move to local inventory because…on-demand manufacturing doesn’t really work that way,” Kaziukėnas said. “[Shein] is much more exposed to both the de minimis change and USPS block.”

Shein did not return Sourcing Journal’s request for comment.

Though Ben Tzion and Kaziukėnas contend that, in the face of short-term disruptions, Temu has a leg up over Shein, Ben Tzion said, in the longer term, Shein may outcompete Temu. Shein has cozied up to U.S. Customs and Border Protection (CBP), voluntarily participating in its pilot on de minimis imports. And Donald Tang, the company’s executive chairman, said in 2023 that the “de minimis exemption needs a complete makeover to create a level playing field for all retailers.”

That could signal that the company has been preparing for such a shift for several years. Because it produces so much of its own assortment, Shein may have the ability to shift its production to other countries not facing tariff troubles.

“If I was in Shein’s shoes, I would look to two sources of relief. One is to diversify to new markets, which is obvious and it’s already happening. And the second would be, can I find alternative production facilities outside of China?” Ben Tzion said.

The Singapore-headquartered fast-fashion e-tailer has made progress on both fronts; its 2023 ESG report noted that it is actively diversifying its supply chains to include manufacturing in Brazil and Turkey. In 2024, it expanded into a variety of new markets—though not without regulatory scrutiny from several of them.

Scott Mattson, managing director and head of technology at investment banking firm Brown Gibbons Lang & Company, said that typical sourcing diversification hubs throughout Southeast Asia may present geopolitical issues, even if not tariffs.

“Anything in that Southeast Asian corridor is ripe for disruption around geopolitical risk. If you’re thinking about longer-term challenges around China’s moves within that entire region, from a geopolitical perspective, it’s got to be pretty scary,” he said.

Ben Tzion said that, if tariffs and duties—or shifting to countries with more expensive labor for production—force companies to drive up prices, Shein may be in a better position than Temu on making those increases quietly.

“Shein is in a better position than Temu, because Shein has a business that is not [as] dependent on price-sensitive consumers,” he said. “There’s value in the product, not just in the price.”

Consumer duties on Chinese goods

But quiet costs may not be the name of the game with tariff sheriff Trump.

Consumers have taken to social media to complain about notices they’ve started to receive from shipping companies like DHL, letting them know they need to pay a duty for their package to be released by customs. That duty applies specifically to packages imported from China.

Though many of these parcels previously would have been imported without duties under the de minimis provision, its collapse has left consumers holding the bag in some cases.

Temu’s ability to store wares in the U.S. may soon benefit consumers ordering from China-founded e-commerce marketplaces; if the seller has already paid an import fee on the product and is shipping the parcel domestically, shoppers won’t need to pay that duty themselves.

In some cases, that could see sellers turning to ocean freight, rather than air freight, to import their items in bulk and offset the cost of tariffs and duties; while air cargo can be more reliable and is faster than ocean freighting products, it’s also more expensive in many cases.

But shipping goods by sea also comes with its own cost: variability.

“[Ocean shipping] is the most cost effective way to ship stuff long distances, but it also is a more variable solution, so the timeline therein is hard,” Mattson said. “If you’re doing what Temu is focused on, which is [providing] consumer goods that are needed when the consumer wants it, patience is not high on their priority…and that gets hard when you rely on ocean freight.”

Meanwhile, Shein customers accepting packages shipped to them from China will need to pay duties themselves. In some cases, that fee exceeds the cost of the order itself. Neither Shein nor Temu has made it clear whether they plan to reimburse consumers for the duties incurred on orders.

Experts said that when it comes to tariffs, taxes and trade, nothing is guaranteed right now.

“There are no safe bets anywhere,” Kaziukėnas said. “I don’t think we know yet what will be the stable status quo for the future. So even for a company like Shein and Temu, it’s hard to make long-term decisions, given how everything is seemingly changing every couple hours.”