Shein Scales Back Vietnam Operations as US Trade Rules Shift

Chinese ultra-fast fashion giant Shein is sharply reducing its operations in Vietnam as changing US trade policies and manufacturing challenges weaken the country’s appeal as an alternative production hub to China.

Shein began leasing around 15 hectares of warehouse space near Ho Chi Minh City in 2025 as part of plans to turn Vietnam into a major export base. The company also encouraged key Chinese suppliers to establish factories there amid concerns over rising US tariffs and the removal of duty exemptions for low-value Chinese shipments.

However, Shein’s Vietnam expansion has since reversed course. Its warehouse lease has reportedly fallen to about 6 hectares, while another source said only one-third of the originally planned facility is being used. Mass layoffs began in April, with some warehouse teams retaining just one-quarter of their employees.

One major factor was the US decision to eliminate the de minimis exemption for shipments worth less than $800 from all countries. The exemption had been crucial to Shein’s low-cost cross-border e-commerce model. Meanwhile, US tariffs on Chinese products declined from their earlier highs, narrowing Vietnam’s tariff advantage.

Manufacturing conditions have also complicated Shein’s supply chain diversification. Suppliers reportedly struggled to replicate the speed, flexibility and extremely low production costs of Shein’s established manufacturing network in southern China. Vietnamese factories have found it difficult to accommodate the small production batches, tight deadlines and thin margins central to Shein’s fast-fashion model.

As a result, some Chinese suppliers that expanded into Vietnam have returned home. Shein is simultaneously increasing investment in Guangdong, with CEO Sky Xu pledging more than 10 billion yuan ($1.5 billion) toward a smart supply-chain system.

Yet Shein faces pressure from its own supplier network. US revenue reportedly fell 14% in the first quarter following the end of the de minimis exemption, while new European Union duties on low-value e-commerce imports could further weaken demand.

Some Shein suppliers are now diversifying to competing platforms such as Temu and Amazon, while others are abandoning Shein’s small, low-margin orders for larger contracts. The shift highlights the challenge Shein faces in reducing its dependence on China without sacrificing the speed and low costs that underpin its global fast-fashion business.