After a long period of major growth and profitability in the USA, Shein is now going through some major struggles in the region. Ahead of its upcoming initial public offering (IPO), documents have shown that the company blames its higher costs for the slowdown, which were driven by U.S. regulatory changes like new tariffs and the closing of the de minimis exemption.
Shein has seen major drops in both revenue and profit within the USA in 2026 so far, and the company believes a similar situation may be on the horizon for its European operations. These struggles may open the door for domestic sellers to compete directly with Shein, something many have struggled to do in recent years.
Shein’s Success in the USA Takes a Major Hit
While Shein once experienced the type of growth and success in the American market that most brands only dream of, it seems that this growth is stalling. For example, between 2024 and 2025, Shein’s revenue in the USA dropped by around 3%, going from just under $10.5 billion to a little over $10.1 billion.
In 2026, these struggles have only gotten worse. For example, in Q1 2025, Shein had quarterly revenue of nearly $2.4 billion, compared to $2 billion in Q1 2026, which equates to around a 14% drop. Profitability has also taken a major hit, as Q1 2025 profit sat at $395 million, while Q1 2026 actually saw the company swing to a loss of $99 million, which is a massive 125% decline.
In addition to these struggles, the company’s U.S. operations are also under investigation by the Federal Trade Commission (FTC), though the exact reason for the investigation is currently unknown.
The Company Blames the Struggles on U.S. Regulatory Changes
In documents that Shein filed ahead of its upcoming IPO, the company blamed these struggles on its decision to increase its pricing. This was primarily done to offset the cost of new tariffs and to account for the USA closing the de minimis exemption, which let packages valued at under $800 enter the country without paying duties.
Shein and other low-cost Chinese ecommerce retailers were major beneficiaries of this rule, as it let many of their shipments enter the U.S. market without any duties being paid. It also let Shein take on a low-price model, where it offered prices that many domestic sellers and retailers in the USA simply couldn’t match.
But once this exemption was closed, Shein saw its costs skyrocket, and it had to raise prices to offset them. When the U.S. government raised tariffs on goods imported from China, Shein took a similar approach.
In the documents, Shein said that “Since May 2025, we have begun passing on the majority of the additional tariff costs by increasing our prices in the U.S. market.” and added that the removal of the de minimis exemption has also had a negative impact on its sales in the country.
Shein’s Troubles May Not Be Limited to the USA
In addition to these struggles in the USA, the company is also bracing for similar troubles in Europe. Europe recently got rid of its own €150 customs duty exemption, and took things a step further by adding a €3 customs duty per item on imported packages valued under €150.
This may lead to a similar, or even worse, outcome for Shein. In the IPO documents, Shein said that the recent developments in Europe “may have a material adverse effect on our business, financial condition and results of operations”, as the region was responsible for around one-third of Shein’s net revenue in 2025 and the first few months of 2026.
But even before these major changes to ecommerce imports in Europe, Shein was already seeing some shaky results in the region. While it saw massive growth from 2023 to 2024, with European sales climbing from $10.2 billion to $13.6 billion, 2025 only saw sales of $14.8 billion.
Like in the USA, 2026 is off to a worrying start in Europe for Shein, as its Q1 2025 sales in the region were $2.8 billion, while Q1 2026 only hit $2.9 billion. While this isn’t a loss, it shows that growth has been incredibly stagnant and almost non-existent, compared to what it had been in the past.
Shein, as well as other Chinese ecommerce giants like Temu, have also been pulling back on European ads recently, which is also likely due to the removal of the customs duty exemption and the implementation of the new fee.
Our Take
Domestic Sellers Can Compete Once Again
While these new tariffs and the closing of the de minimis exemption in the USA hurt Shein and other low-cost ecommerce importers, it opens up plenty of opportunities for American sellers. The move levels the playing field, as Shein has less of an opportunity to undercut prices as aggressively as they have in the past.
Now, as people looking for deals search through foreign apps and platforms, the deals don’t look as appetizing as they once did, which gives domestic sellers a chance to earn back their business.
Also, this shift is the perfect time for domestic sellers to focus on quality and value. Because many customers are being forced to pay more for the previously low-cost products on platforms like Shein, they may re-evaluate their purchases and priorities and be more open to buying higher-quality items, especially if the price gap isn’t as wide as it was in the past.
