Chinese fast-fashion retailer Shein has significantly reduced its warehouse operations in Vietnam, reversing a major supply chain expansion initiated in late 2024. The company, which relies heavily on Chinese suppliers, had leased 15 hectares of warehouse space near Ho Chi Minh City—equivalent to 21 soccer pitches—as part of a strategy to mitigate rising U.S. tariffs. However, the facility now covers just 6 hectares, with only a third of the originally planned site in use, according to sources familiar with the operations.
In documents filed ahead of its planned Hong Kong IPO, Shein acknowledged that U.S. sales declined more than 3% between 2024 and 2025, with a 14% drop in the first quarter of 2025 compared to the prior year. The company attributed the slowdown to price increases implemented to offset new tariffs, which took effect in May 2025. Shein warned that similar challenges could emerge in Europe, its largest market, where duty-free shipping for low-value packages was recently eliminated and flat-rate fees were introduced. In Europe, Shein reported 9% sales growth in 2025, down from 33% growth between 2023 and 2024, with first-quarter sales rising just 2%.
The company’s retreat in Vietnam follows mass layoffs that began in April 2025, with some teams retaining only one in four employees. A Reuters visit to the site in late July found only a handful of workers and few trucks present, contrasting with nearby warehouses operated by other tenants. Shein did not respond to requests for comment on the operational changes.
Supply Chain Shifts and Trade Policy Impact
Shein’s decision to expand into Vietnam in late 2024 was driven by anticipation of U.S. tariffs on Chinese goods reaching 145% by April 2025, following Donald Trump’s re-election. The company had encouraged its largest Chinese suppliers to establish manufacturing bases in Vietnam to avoid tariffs, but the experiment has since faltered. Analysts note that Shein’s business model remains heavily dependent on Chinese suppliers, despite efforts to diversify geographically.
The company’s IPO filing highlights the broader challenges posed by global trade policy shifts, including the removal of the de minimis exemption in the U.S., which previously allowed duty-free shipping for low-value packages from China. Shein stated that it expects to increase prices in Europe to offset higher costs, warning of potential short-term declines in sales volume. The filing also noted that the impact in Europe could exceed the U.S. slowdown, though the company did not provide specific projections.
Market Reactions and Long-Term Implications
The slowdown in Shein’s growth has raised questions about the sustainability of its ultra-fast fashion model, which relies on low prices and rapid inventory turnover. The company’s revenue decline in the U.S. and decelerating growth in Europe underscore the challenges posed by rising trade barriers and shifting consumer demand. Industry observers suggest that Shein may need to further adjust its pricing strategies or explore alternative supply chain models to maintain competitiveness.
The company’s retreat in Vietnam also reflects the fragility of supply chain diversification efforts in the face of entrenched dependencies. While Shein has not disclosed further plans for its Vietnamese operations, the scaled-back facility suggests a shift toward greater reliance on existing Chinese infrastructure despite trade headwinds. The long-term implications for Shein’s IPO and global expansion remain uncertain as trade policies continue to evolve.