Shein finds there’s no place like China after Vietnam warehouse experiment disappoints  

HANOI/GUANGZHOU – Just over a year ago, Chinese ultra-fast fashion retailer Shein began leasing 15ha of warehouse facilities – equivalent in size to 21 soccer pitches – near Ho Chi Minh City, part of a grand experiment to make Vietnam a major export base.

When it was formulating those plans in late 2024, it seemed like a bet that, while risky, was worth making.

US exemptions from duties on small parcels from China that underpinned its business model looked as if they would be abolished. US President Donald Trump had just been elected to a second term, and fears of a heightened trade war were soon realised, with US tariffs on many Chinese goods rocketing to 145 per cent by April 2025.

Shein started encouraging its biggest Chinese suppliers to set up manufacturing bases in Vietnam.

Today, initial public offering (IPO) bound Shein, known for selling US$5 (S$6.40) tops and US$10 dresses, is drastically scaling back in Vietnam, according to six people familiar with its operations there.

At 15ha, the bonded logistics hub was the largest of its kind in the country and employed thousands. The lease now covers 6ha, according to two of the sources. A separate person with direct knowledge of the matter said a third of the originally planned site is in use.

Mass layoffs began in April, and more are expected, warehouse workers said, adding that some teams have retained one in four employees, while others have lost even more. During a Reuters visit to the site in late July, only a handful of workers were present, and just a few trucks were parked at its warehouses. Nearby warehouses operated by other tenants were bustling with activity.

Its sharp U-turn in Vietnam, which has not previously been reported, reflects abrupt changes in US trade policies while underscoring how dependent Shein’s business model is on Chinese suppliers, which put up with terms that manufacturers in other countries will not – a pattern Shein has also seen play out in Brazil.

It also highlights how Shein is hewing more closely to its Chinese roots. Having unsuccessfully sought listings in New York and London and moved its headquarters to Singapore as it expanded globally, the company is now pursuing a Hong Kong IPO while deepening its commitment to its manufacturing base in southern China.

The first and biggest hit to Shein’s Vietnam plans was the end of the US de minimis duty-free exemption for shipments under US$800 from all countries, not just China. Trump ordered the move on July 30, 2025, and it took effect a month later, only a few months after the exemption for shipments from China ended.

Then, sky-high US tariffs on Chinese goods gradually came down. Vietnamese apparel is still subject to smaller tariffs than Chinese clothing, but the advantage is no longer as large as it used to be.

A knit polyester dress, for example, imported from either Vietnam or China, is subject to a 16 per cent duty, but the Chinese item would be hit with Section 301 tariffs imposed for alleged unfair trade practices that could lift the effective rate to around 33.5 per cent.