Chinese Clothing Mega-Vendor Shein Shuts Down Its Factories

The tariffs are biting China worse than they're biting us.

We're in a tough period. Business does not like uncertainty. There are thousands of US businesses that rely on Chinese factories to make their products. These business could invest a lot of money into building US factories (or factories in Mexico or something), but they don't know when China will cave, or Trump will make a deal with them. If they invest that money in new factories -- it could be wiped out when Chinese factories are back on-line.

So for now, they're in limbo. They don't know what to do. They can't invest until they know what the future rules will be.

That doesn't mean I object to Trump's tariffs. Trump is attempting to undo 40 years of the US moving almost all of its manufacturing to a hostile foreign communist regime that every once in a while looses a pandemic on the world.

There are going to be dislocations. There is almost certainly going to be a recession. If China goes into a recession, the world will do the same soon after.

I think it's a fight that must be fought... but boy oh boy am I hoping that China comes to the bargaining table sooner rather than later.

Xi will lose his job if China is plunged into a deep recession with huge unemployment.

But... how long will that take?

Let's hope this is enough to get Xi to move.

Factories supplying Chinese fast-fashion giant Shein have ground to a halt in southern China, as President Donald Trump's new tariffs and closure of the "de minimis" loophole upend Beijing's retail export model. With the tariff policy set to take effect on May 2, dozens of garment workshops in Guangzhou's Panyu district -- dubbed "Shein Village" -- have gone idle, marking a major shift in the global fast-fashion supply chain.

The "de minimis" loophole exempted products whose individual-sale cost was under a certain level from any tariffs, even if the factory making those products was exporting billions of dollars worth of them to America.

Trump ended that exemption. That really bites into China, which exports trillions of dollars of crap into the US but a lot of it is cheap on a by-unit basis.

Key Details:

President Trump's removal of the "de minimis" tax exemption will now subject all foreign shipments -- regardless of value -- to import duties.

Chinese garment factories supplying Shein and similar online retailers have shut down operations or shifted sales strategies.

Shein is urging suppliers to move operations to Vietnam, while others unable to adapt have closed entirely.

Diving Deeper:

The Trump administration's decisive end to the de minimis loophole -- which allowed online retailers to ship duty-free goods to the U.S. if orders were under $800 -- has sent shockwaves through China's fast-fashion manufacturing sector. In what many industry insiders view as a long-overdue correction to America's lopsided trade relationship with Beijing, President Trump's policy imposes a new layer of economic accountability on China's retail exporters.

...

Chinese manufacturers had heavily relied on the now-defunct loophole, which provided a price edge over U.S.-based retailers by circumventing import duties. "Orders from Shein have fallen this year, and our sales are down by a lot," said one worker at a local facility. The downturn has forced some business owners to pivot to social media-based direct sales or to explore other Asian markets with lower shipping costs and fewer trade restrictions.

In some positive tariff war news: Swiss drug manufacturer Roche is investing $50 billion in US manufacturing to avoid tariffs.

Roche announced Tuesday it will pour $50 billion into the U.S. over the next five years, creating more than 12,000 jobs and expanding domestic manufacturing. The move comes as President Donald Trump moves to revoke tariff exemptions for foreign pharmaceutical products.

Key Details:

The $50 billion commitment will support new research and development facilities and manufacturing expansions across Indiana, Pennsylvania, Massachusetts, and California.

Roche said the investment will create over 12,000 jobs--including 1,000 new positions at the company--and result in more pharmaceutical exports from the U.S. than imports.

A new 900,000-square-foot facility will help produce next-generation weight loss drugs, while a Massachusetts-based R&D hub will focus on AI and chronic disease research.

From Real Clear Energy: Japan can negotiate its way out of tariffs by agreeing to buy more energy from the US, instead of China.

The global economy has been jolted by a new round of Trump tariffs. The U.S. has proposed a flat 10% import tariff, along with an additional "reciprocal tariff" pegged to bilateral trade imbalances. For Japan, this would result in an effective cumulative tariff of 34%. While implementation of the reciprocal tariff has been delayed for 90 days, the underlying tensions remain unresolved.

Japan now finds itself in a critical window of negotiation. Washington may push Tokyo to increase agricultural imports or influence currency policy to strengthen the yen. But a more strategic and mutually beneficial path lies in the energy sector--a domain where U.S. and Japanese interests align naturally.

Rather than viewing these tariffs as a threat, Japan should treat them as a wake-up call to reassess its energy and industrial policy. The country's current "Green Transformation" (GX) initiative aims to achieve net-zero carbon emissions by 2050, heavily investing in solar and wind energy, as well as electric vehicles.

However, these sectors are overwhelmingly dominated by China. Over 90% of the world's solar panels and more than half of its wind turbines are produced there. In effect, Japan's green energy push is subsidizing Chinese industry--while reducing demand for fossil fuels, much of which could be supplied by the United States.

Redirecting energy imports toward American oil and gas would simultaneously enhance Japan's energy security and improve the U.S. trade balance--directly addressing one of the Trump administration's key concerns. Given Washington's ongoing economic decoupling from China, a Japanese pivot away from China-centered green energy technologies would be welcomed.

Not only does Trump risk a recession-- again, I think this fight must be had, but we're on the edge of a recession -- but also, that recession will disproportionately affect business owners... also known as "Republican leaners." That's politically dangerous.

So I hope that Trump can execute the Michael Scott Negotiating Gambit against Xi quickly.

posted by Ace at 05:45 PM

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