Shein Swings to Loss as US and EU Tariff Changes Disrupt Sales Ahead of Hong Kong IPO

Shein has swung to a loss in its first quarterly filing since announcing plans for a Hong Kong listing, with the fast fashion group blaming the impact of tariff changes in the US and Europe that have dismantled the duty-free loophole it relied on for cross-border shipments.

The company reported a net loss of $99 million for the three months to the end of March, compared with a profit of $395 million a year earlier. Sales edged 1.1% higher to $9.05 billion, the figures showed.

Shein said the loss was largely driven by a $328 million accounting charge linked to special investor shares. But the filing also laid bare the commercial disruption from the removal of the so-called “de minimis” exemption in the United States, which had allowed Shein to ship garments from China directly to customers without paying import duties.

The US scrapped the exemption in May 2025, part of former President Donald Trump’s trade war measures. The European Union followed earlier this month, imposing a three-euro duty on small parcels imported from outside the bloc.

“Since May 2025, the removal of the US de minimis exemption has had an adverse impact on our sales in the US and the overall growth of our net revenues,” Shein said in the filing. The company added that it had “since observed signs of normalisation in consumer purchasing behaviour and sales trends in the US.”

The European impact may prove more severe. Shein generated roughly a third of its sales from Europe last year, and the company warned that the EU’s removal of the small-parcel exemption could have a “material adverse effect on our business, financial condition and results of operations.”

“Although it remains too early to fully assess, it is possible that trends in the EU could be generally in line with or exceed the impact observed in the US after the removal of the US de minimis exemption,” Shein cautioned.

To offset the higher costs from duties and taxes, Shein said it is pursuing a range of options, including raising prices in the US market. “In response to the increased duties and taxes, we are pursuing a wide range of options, including increasing our prices in the US market to offset a portion of the increased costs,” it said.

The company noted that price increases in Europe may cause a “short-term adverse impact” to sales, but added that the “long-term impact remains too early to fully assess.”

The UK is also moving to close the small-parcels loophole, though on a slower timetable. Former Chancellor Rachel Reeves confirmed plans in the 2025 autumn budget to review the customs exemption, saying she wants to “support a level playing field in retail.” The proposed reforms were initially not expected to take effect until 2029, prompting calls from high street retailers to accelerate the timeline. The government brought the plans forward by six months in June, to October 2028, but retailers have still criticised the delay.

The regulatory tightening across major markets comes as Shein prepares for its long-planned initial public offering in Hong Kong. The company recently announced its decision to list there, and the first-quarter filing is the first since those plans emerged. The loss and the mounting tariff pressures are likely to sharpen investor scrutiny of the fast fashion retailer’s business model, which has long depended on low-cost, duty-free direct-to-consumer shipments from China.