Shein's London IPO in Jeopardy as Trump Targets Tax Loophole
Shein's ambitious £50 billion London listing faces uncertainty after President Donald Trump's move to eliminate a tax exemption critical to its business model.
Trump has pledged to scrap the "de minimis" exemption for low-value parcels shipped from China, Canada, and Mexico to the US. Currently, such packages avoid import duties if they are worth less than $800 (£645).
The loophole has benefited retailers like Shein by allowing them to ship small orders directly to customers without paying customs charges. However, the White House has criticized the "overuse" of this exemption.
According to estimates by the US Select Committee on the Chinese Communist Party, Shein and Temu shipped nearly 600,000 packages to the US daily under the $800 threshold.
Trump's executive order to eliminate the exemption could result in significantly higher duty costs for Shein, as the majority of its US sales are shipped in small packages. This uncertainty casts doubt on the company's plans to join the London stock market.
Investors seeking to buy shares in Shein will demand reassurance about the reliability of its financial projections, which will be difficult to provide given the looming tax changes.
Neil Saunders of GlobalData believes the removal of the de minimis exemption is "potentially very disruptive" and could "dampen investor sentiment." Shein has diversified its shipping locations, but it could still face hundreds of millions of dollars in additional import duties.
Wayne Brown of Panmure Liberum warns that the US clampdown could be followed by similar moves in other markets, including the EU, UK, and other countries.
Critics have accused Shein and Temu of undercutting local rivals by shipping goods directly to customers. Last year, a Shein spokesperson defended the practice, claiming it allowed the company to keep prices affordable. However, EU officials are planning to increase customs checks on parcels from these companies.
Meanwhile, Shein's planned London listing faces scrutiny over alleged supply chain abuses, including labor exploitation. A judicial review process has been initiated by Stop Uyghur Genocide to block the IPO.