Tariffs and volatile shipping costs are impacting the low-cost fashion engine behind Shein's rise, and the company says shoppers should brace for more disruption.
Pressure is already visible in Europe, one of Shein's key markets, where sales fell sharply after the retailer lifted prices before the European Union scrapped a tax break for small parcels.
Here's what to know
In the quarter ending June 30, Shein generated $11.08 billion in total net revenue, up 0.9%, in its first Hong Kong trading update since listing. That modest increase came despite softer product demand and weaker results in some regions, as expansion in service activities, including the company's online marketplace, offset a 3.4% decline in product sales, The Independent reported.
Tariffs continued to weigh on the company in the United States, where quarterly net revenue fell 6%. Shein said the drop was less severe than the 14.3% fall in the first quarter and described that narrowing decline as evidence of recovery in the region.
The steeper setback came in Europe, where revenue dropped 13.9% to $4.38 billion. According to Shein, the decline reflected lower volumes and a shift toward its marketplace services after it increased prices and cut online advertising ahead of the EU ending the duty exemption for parcels under 150 euros.
Yangtian Xu, Shein's chairman and chief executive, said the company still sees the rest of 2026 as difficult, with tariff pressure and fluctuating logistics costs continuing to cloud the outlook.
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More background
The business model behind ultra-cheap apparel has long relied on sending huge numbers of low-value parcels straight to shoppers, but higher tariffs, the loss of customs breaks, and rising transport costs can quickly erode those economics.
After the U.S. made a similar move, the EU ended its small-parcel duty exemption at the beginning of July.
The United Kingdom has likewise said the comparable customs duty relief for packages worth less than £135 (~$178 USD) will end in October 2028.
What's being done?
Governments are increasingly targeting the trade rules that helped fuel the flood of cheap clothing imports. By ending small-parcel exemptions, policymakers are making it harder for retailers to undercut competitors through tax and shipping advantages.
Companies such as Shein are responding by leaning more on marketplace and service revenue, trimming ad spending, and managing costs more tightly.
Shein specifically pointed to "ongoing cost optimisation and productivity initiatives" as it navigates the second half of 2026.
"We expect the external environment to remain uncertain in the second half of 2026, with tariff headwinds and logistics cost volatility likely to persist," Xu said.
Where can I learn more?
Shein has also faced pressure on other fronts, from a California penalty over shipping delays to legal and regulatory battles in the U.K. and EU. One story also highlights strong profit growth in the company's U.K. arm even as broader trade pressures intensify.
• In California, Shein accepted a hefty government penalty over alleged shipping-delay deception affecting shoppers.
• In the U.K., a massive lawsuit followed claims that a former partner exposed tax-evasion schemes.
• Shein's U.K. arm posted huge pretax profit growth even as wider trade pressures intensified.
• European regulators issued an urgent warning as pressure mounted over Shein's sales tactics.
• In Britain, Shein pushed back as the government considered a clampdown on low-value parcel rules.
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