It seems like one of the only things that Democrats and Republicans can agree on these days is that China is an economic rival at best, and an enemy of the state at worst.
TikTok has felt that wrath. And now two of the fastest-growing shopping apps in history with strong ties to China are caught in the crosshairs too.
One is Temu, the discount shopping app for…basically everything . Temu is not even two years old yet but it's already at the top of charts for U.S. shopping apps thanks to its bargain-basement prices and often-passable quality.
Then there’s Shein, the online fashion retailer that is ringing up more than $30 billion in annual sales, which is more than its 80-year-old rival H&M, and which could soon surpass the annual revenue of fast-fashion industry giant Inditex, the parent company of Zara.
Last week, a group of U.S. senators on both sides of the aisle introduced legislation that would overhaul a century-old trade rule known as “de minimis” that allows overseas businesses to send low-value packages to customers in this country while avoiding most customs scrutiny as well as import duties.
The politicians' announcement called out these two companies as “abusing” the trade rule and blamed them for an onslaught of shipments that overwhelm customs staff, “making it increasingly difficult to effectively target shipments for scrutiny and stop packages containing illicit drugs, counterfeits, and other goods that endanger American communities or violate U.S. law.”
What goes unsaid is that many U.S. businesses ship goods to warehouses in Mexico or Canada, rather than to facilities in the U.S., solely to take advantage of this loophole too. You can argue that’s true exploitation.
The bill, called the Fighting for America Act of 2024, would eliminate this loophole for apparel and textile shipments, and charge $2 per parcel for those products that still qualify. It’s almost certain that Temu and Shein prices would rise as a result. Customers might feel that pain.
Government officials in the U.S. and abroad have also warned of a “high risk” that some products sold by these companies are made using forced labor. If proven accurate, that’s more than problematic. At the same time, can we be certain that products sold on Amazon, where China-based sellers account for an estimated 50 percent of top merchants, are not?
Then there’s the criticisms of low-product quality despite strong customer-retention stats for Temu. Opponents of these companies also stress the potential environmental impact of Shein’s fast-fashion approach, which is fair for that entire sector but ignores how well the Chinese company’s model matches demand with supply to avoid some of the enormous waste created by more traditional apparel brands with outdated forecasting techniques.
“It turns out China is good at making stuff,” Jason Goldberger, the chief commerce strategy officer at Publicis Groupe who follows these companies closely, told me. “Most of the stuff is pretty good value for the money. It’s kind of racist and outdated to say that Made in China equals crap.”
For US politicians and American businesses, Temu and Shein have become convenient bogeymen. Yes, de minimis in its current form no longer makes sense. Yes, these companies should pay the price if they violate U.S. law. Yes, it’s difficult for small U.S. merchants to compete head-to-head with these fierce rivals.
But titans of retail like Walmart and Amazon long ago decided that the low prices made possible by outsourcing manufacturing and supplying to China was more important than supporting strong manufacturing in this country. This is a new twist on an old phenomenon.
In short, the storylines surrounding Temu and Shein are more complicated than some critics would like to admit. And that’s worth noting.
“There’s no white hats and black hats in any of this,” Goldberger told me. “It’s all shades of gray.”
Jason Del Rey
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This story was originally featured on Fortune.com
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