The news: Shein has cut its leased warehouse space near Ho Chi Minh City from 15 hectares, about 1.6 million square feet, down to 6 hectares. Reuters reported the cut on August 9, citing two sources.
Layoffs began in April. Some teams kept one in four employees, warehouse workers said, according to Reuters.
When Reuters reporters visited the site in late July, a handful of workers were present and a few trucks sat parked. But the warehouses of neighboring tenants were busy.
The Chinese suppliers Shein had encouraged to set up production in Vietnam are returning to Guangzhou, and Shein is following them. In February, CEO Sky Xu made a rare public appearance to pledge more than 10 billion yuan, about $1.5 billion, for a smart supply-chain system in Guangdong province.
The backdrop: Shein started pushing its supply base toward Vietnam in late 2024, when the US was raising tariffs on Chinese goods and nearly everything the company sold was made in China.
Bloomberg reported in February 2025 that Shein was asking its largest Chinese suppliers to build capacity in Vietnam. The company offered procurement prices up to 30% higher, larger guaranteed orders, and help constructing plants and moving materials.
Three months later, Reuters reported the lease: nearly 15 hectares near Ho Chi Minh City, to store goods from contractors before export.
Tariffs on many Chinese goods had reached 145% by April 2025, while Vietnam paid the 10% baseline rate because its own reciprocal tariff was paused that month.
The de minimis exemption, which let low-value parcels into the US without duties, had already been revoked for Chinese shipments. So goods shipped from Vietnam would avoid both, and a Vietnamese base also offered duty-free access to Europe under the EU-Vietnam trade agreement.
What changed: Between August 2025 and July 2026, three policy actions took away most of the reasons to be in Vietnam.
August 2025: de minimis ended. The White House ordered the exemption closed for all origins on July 30, 2025, effective a month later. Shein had to pay duties on parcels from anywhere, so shipping them from Vietnam instead of China stopped helping.
February 2026: the Supreme Court struck down the IEEPA tariffs. The country-by-country rates that had made Vietnam much cheaper than China came down. Reuters calculated what was left on a knit polyester dress. Either origin pays the same 16% base duty, but Section 301 duties, extra tariffs the US charges over another country’s trade practices, take the Chinese version to roughly 33.5%.
July 2026: the forced-labor tariffs left Vietnam worse off than its neighbors. The Section 301 action effective July 24 put a flat 12.5% duty on both China and Vietnam. Bangladesh, Cambodia, Indonesia and Malaysia pay 10%, and they are due to receive three-year quotas letting a set volume of textiles be free of the new duty. Vietnam got neither.
On that dress, the difference between the two countries is now 17.5 points. In April 2025, when China faced 145% and Vietnam paid 10%, it was 135. And every parcel now carries duty regardless of where it ships from.
How it works: Vietnam was struggling before any of the rules changed.
Shein’s speed comes from thousands of small factories in Guangzhou’s Panyu district. According to Reuters, they produce millions of styles in small batches, at margins as low as 1 yuan per piece, about 15 cents. Those batches are filled in days and reordered against live demand from 273 million shoppers.
The factories take runs that small because they sit minutes from fabric markets, trim suppliers and each other, and because enough of them compete for the work.
Shein could not rebuild that in Vietnam. Suppliers who opened plants there struggled to find workers willing to put in long hours for low pay, Reuters reported, and many of them have since come back.
One is a Panyu factory manager surnamed Wen. “Despite the smaller U.S. tariff rate on Vietnamese goods compared to Chinese ones, the low efficiency still makes it less viable than manufacturing in China,” he said.
“Sourcing diversification beyond China has practical limits, especially for companies like Shein whose competitive advantage depends on speed, flexibility, and extremely small production runs,” said Sheng Lu, a professor of fashion and apparel studies at the University of Delaware.
Vietnam handles plenty of apparel work. Its textile and garment exports grew 1.7% in the first half of 2026 to $22.2 billion. Nike made 52% of its footwear there last fiscal year, against 16% in China.
But that production is planned months ahead and made in large quantities, while Shein’s is ordered in small batches and reordered every few days.
Shein was under pressure at home, too. Guangzhou authorities warned the company in mid-2025 against moving orders significantly away from the region.
Thousands of its smaller suppliers have started supplementing their income by opening their own stores on Temu and Amazon, Reuters reported. One Panyu manager, Yang of Jiang Gong Clothes, said his factory dropped Shein. That is because its orders are often just dozens of pieces at a time, he said, “which makes production a hassle.”
The details: The Guangdong money goes into the same Guangzhou suppliers Shein could not move. What changed on the US side is how the goods get there.
Shein’s draft Hong Kong listing documents say the company is reducing its cross-border duty exposure by increasing locally held inventory and expanding partnerships with local fulfillment providers. Rather than shipping each order as a parcel from China, it sends goods by the container, clears customs in bulk, and pays the duty before a customer orders.
Since June 30, its semi-managed and self-operated US sellers have been required to ship most orders through platform-approved logistics.
That shift costs more. Fulfillment expenses reached 47.7% of net revenue in the first quarter of this year, up from 42.8% a year earlier, and operating margin narrowed to 2.9% from 3.9%.
US revenue fell 14.3% to $2 billion. The company said the drop came mainly from a high base in the first quarter of 2025, before the tariffs took effect. It also said it has been passing most of the added tariff cost into US prices since May 2025.
The counter: There is a simpler reading of the same facts: Shein’s US business got smaller, so it needed less warehouse space.
The company is also cutting costs ahead of a Hong Kong listing that follows failed attempts in New York and London. Layoffs, a shorter lease and a lightly staffed site are what that looks like too.
Nobody has published how much production ever moved. Bloomberg reported the incentives Shein offered suppliers, but there is no public figure for how many took them or what share of units Vietnam ever made.
Shein denied in April 2025 that it was shifting production out of China. If Vietnam was always a pilot, shrinking it is a smaller decision than a retreat.
My view: My read is that Vietnam was failing as a production base before the tariff rules mattered. Wen, whose fellow Panyu suppliers went to Vietnam and came home, and Sheng Lu, who studies the trade for a living, both say so plainly.
The rule changes did not cause the retreat. They removed the last reason to keep paying for a site that was not working.
The part of Shein’s response I would call durable is the least interesting one: holding inventory in the U.S. It costs more, and the fulfillment numbers show that. But it does not depend on any rate staying where it is.
What's next: Shein’s Hong Kong listing is still in draft. Because the U.S. inventory shift is described in the documents filed for it, the next accounting of what that model costs comes with the listing.
