Biden Targets Shein and Temu’s Loophole… Will It Spell the End of Their Bargain-Basement Prices?

It looks like Shein and Temu have some big problems coming down the pike—and no, I’m not talking about the fact that they keep bombarding you with ads for $50 computers or sweaters priced like they came out of a vending machine. 

Nope, this time the heat’s coming from a little higher up. And by "higher up," I mean the highest office in the land. That’s right, President Joe Biden is setting his sights on these Chinese e-tailers, and let’s just say they’re probably freaking out right now.

You see, with only a few months left in his presidency, Biden’s out here trying to patch together a legacy—or at least, what’s left of it after four years. He’s checking off boxes and, apparently, one of those boxes is sticking it to foreign companies that have been dancing around U.S. trade laws like they’re trying out for "Dancing with the Stars." 

This loophole—called de minimis—lets packages under $800 sneak into the U.S. without having to pay import duties. Sounds like a steal, right? Well, that’s exactly what Shein and Temu have been taking advantage of, much to the frustration of American businesses.

But Biden’s not having it anymore. According to a spokesperson from the House Select Committee on the Chinese Communist Party, this loophole has been a cash cow for these fast-fashion giants, allowing them to flood the U.S. market with cheap goods without any of the usual financial penalties.

In 2022 alone, 685 million shipments entered the U.S. under the de minimis rule—30% of which came from Shein and Temu. And get this: nearly 62% of those low-priced shipments originated from China. It’s like these companies found a cheat code, and now the Biden administration is holding down the power button.

If Biden gets his way, that loophole’s getting a serious makeover, and those $5 T-shirts you keep seeing could soon come with a 20% price hike. That might not sound like much, but for Shein and Temu, whose whole schtick is low prices, that’s like telling Steph Curry he can’t shoot threes anymore. It’s kinda his thing.

Retail analyst Neil Saunders put it this way: if the de minimis exemption is removed, Shein and Temu are going to lose their pricing superpower. Sure, they’ll still be cheaper than the Zaras and H&Ms of the world, but that razor-thin competitive edge? Gone. It’s like when Netflix jacked up its subscription price, dropped the password-sharing crackdown bomb, and suddenly you started thinking, “Maybe Hulu’s not so bad after all.” You might stick around, but you’re definitely eyeing the alternatives.

Oh, and it’s not just about the price hikes. Shein and Temu have been facing increasing scrutiny from the U.S. government for labor practices, too. In fact, Shein’s hopes of going public in the U.S. are pretty much DOA thanks to ongoing investigations into forced labor in their supply chains.

So, where does this leave Shein and Temu? Well, let’s just say their days of dominating the American market with ultra-low prices might be numbered. And for us consumers, it might mean fewer deals on dirt-cheap sweaters. But hey, if it means fairer competition and fewer ethically questionable goods, maybe that’s a price worth paying. Of course, some folks will still be crying over their lost $2 leggings, but pretending forced labor isn’t a thing doesn’t make it any less wrong.

In the meantime, Temu, if you’re reading this, I’m still not buying that $40 computer monitor.

Stock.News has positions in Netflix and Disney.

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