For years, American consumers have been able to spend next to nothing on the latest fashion trends, thanks in large part to Chinese clothing companies like Shein and Temu. These businesses have long used a loophole to send millions of packages a day into the U.S. from China tax-free.Now, President Trump is closing that loophole, even as he de-escalates his larger trade war with China, and prices are going up.Meaghan Tobin, who covers business and technology in Asia, discusses whether this might be the end for fast fashion.Guest: Meaghan Tobin, a correspondent for The New York Times, covering business and technology in Asia.Background readingMeaghan Tobin and Agnes Chang write about President Trump’s latest changes to taxes on small packages from China.Meaghan Tobin explains how a U.S. tax loophole supercharged China’s exports.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. Photo: Qilai Shen for The New York TimesUnlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify. Unlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify.
Chapter 1: Who are the hosts and guests introducing the episode?
From The New York Times, I'm Katrin Benhold. This is The Daily.
Y'all, this box is so heavy. Yeah, $1 shirts, $2 shirts, $3 shirts, $5 dresses. Like, it was ridiculous.
For years, American consumers have been able to spend next to nothing on the latest fashion trends.
So for a sweatshirt, a t-shirt and a tank top, the total was $14.82 off of Shein.
If you want to be a baddie on a budget, Shein is the way to go. Thanks in large part to Chinese clothing companies like Shein.
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Chapter 2: What is fast fashion and why are prices so low?
I might be the overconsumption final boss because I keep buying the same things, just different colors and in different fonts.
That have long used a loophole to send millions of packages a day into the U.S. from China, tax-free. But now... President Trump is killing that loophole, even as he de-escalates his larger trade war with China.
A dress I had on my car was like $9. It's $18 now. They weren't playing.
And prices are going up.
What if, like, prices just, like, never go down? Like, what if I could never get a miniskirt for $7 ever again? Like, I'm scared.
Today, I talk with my colleague Megan Tobin about whether this might be the end of fast fashion. It's Thursday, May 15th.
Are you guys going to miss the prices before the tariffs? Let me know in the comments.
Megan, welcome to the show. Thanks for having me. So I know you've been reporting on Shein and other fast fashion companies for many years, but I can reveal to you that I am also an expert on the subject because I have a teenage daughter who spends a lot of her time and pocket money on Shein. And I did my research before coming on today and asked her about her latest haul.
Tell me what she bought. So she got a lot of things. Wait for it. She got a bikini for $5, a jewelry box for $2.60, a phone case for $2, a tube top for $2, a couple of tank tops for $4 each, a claw clip for just under a dollar. And I think the single most expensive thing on her receipt was actually a pair of jean shorts for like $6. It's kind of insane. That sounds like a classic Shein haul.
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Chapter 3: What is the de minimis exemption loophole and how has it affected imports from China?
So clothing from Shein is so cheap in part because until a couple weeks ago, it could come into the United States without anyone having to pay any taxes on it, thanks to a tax loophole called the de minimis exemption. But that loophole has now been closed, which means customers in the United States are going to have to pay more to get their fast fashion clothes.
And it's still closed, even though China and the U.S. passed their super high tariffs earlier this week?
Yes. On Monday, President Trump issued an executive order saying that goods that previously would have come into the United States under this loophole will now be subject to tariffs of 54 percent.
OK, so let's talk about this loophole. What is it?
So this loophole is called the de minimis exemption, and it's basically Latin for it's too small to matter. And it started back in the 1930s when the U.S. government was trying to come up with a threshold for which it basically decided it was not worth the effort to collect taxes on imports under a certain value. Right.
So in the 1930s, the de minimis exemption was a dollar, and the de minimis threshold was raised in the 90s as part of a wave of new trade policies worldwide that were based on the idea that more open trade would benefit everybody. And it was raised again to $800 in 2016. Wow, $800. I mean, that feels like a pretty high amount to not pay any tariffs on.
What was the justification for letting this threshold be this high in the United States?
The thinking at the time was that this would help American businesses who relied on imported goods. And it really coincided with a period of time when online shopping took off around the world and also when the Chinese government was pushing businesses in China to find markets overseas. The Chinese government wanted China to be the world's factory.
And so all of that really opened the floodgates into the United States for low-cost goods from China.
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Chapter 4: How has Shein's business model changed the fashion industry?
They have this proprietary system that allows them to place really small orders with really short turnaround times with their suppliers. That enables Shein to avoid the cost of maintaining a lot of inventory. And unlike Zara or H&M, who ship their clothes in bulk to warehouses in the United States, who then distribute it to shops, Shein mails their items directly to customers.
And what's interesting is that because of their proprietary system, they can see how things are selling on the app and quickly notify suppliers that they need to make more. So sometimes when you buy something on Shein, it might not actually even have been made yet.
Wow.
And so if all of a sudden everyone in your TikTok feed is wearing baggy cargo pants or lime green crop tops, immediately you can also see those being offered on Shein. And if more people start buying them, the platform can quickly ask more suppliers to keep making them. That enables them to offer a huge variety of products on their app for very little money.
So instead of fast fashion, it's more like ultra fast fashion.
Yeah, it is kind of crazy. You see something on TikTok and before you know it, it's delivered directly to your doorstep and for like no money. It's a little bit like consumerism on steroids or something.
Totally. And Shein is not without its critics. There are all kinds of concerns about Shein and ultra-fast fashion. There are concerns about labor practices at some of the factories that supply for Shein. And of course, there are environmental concerns because millions of packages are being flown across the world every day.
And because the prices are so low, it makes the clothes feel almost disposable.
Mm-hmm.
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Chapter 5: What are the ethical and environmental concerns related to ultra-fast fashion?
Which is bad news for all the Americans who've become used to paying next to nothing for these clothes, right? But it sounds like it could be existential for companies like Shein and all the people who make the clothes.
Yes. Which is why I went to Guangzhou, a city in the southeast that is in many ways the heart of the global garment industry. It's where many of Shein's hauls are made. And I wanted to go there to see what the end of this loophole means for the millions of people who work in this industry. And ultimately what it means for the fate of fast fashion.
We'll be right back. So, Megan, you're actually talking to us from China. You're in China. Tell us about your recent trip to Guangzhou. What did you see?
So the thing you need to know is that China makes nearly one in every three garments sold around the world. Wow. And much of that comes from Guangzhou in the factories that are part of the Xi'an network. And in a lot of ways, this city is really the global hub of garment manufacturing. And I wanted to see what the impact of the end of the de minimis loophole was going to be on the ground here.
So my colleague C. Zhao and I went to Guangzhou to check it out. Many of the garment factories in Guangzhou are essentially open-air workshops. They're like big warehouses with garage doors that open onto the street. And they're full of sewing machines that are clacking away at all hours of the day and night. And different workshops have different functions.
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Chapter 6: Why did the U.S. government decide to close the tax loophole on small imports?
So some places might assemble whole garments and other places will just sew on zippers and ruffles.
And one of the places that we went was a labor market for day laborers.
this kind of informal market where a lot of the workshops go to recruit their labor for the day. And hundreds of managers from different factories were lined up on the sidewalk looking for people to do different sewing tasks all day long.
So some places are putting together the main seams of a garment, and then down the street is a place that will sew in the zippers, and another one that will do the elastic waistband. And then there's a different company that will come and pick up the packages and bring them to a collection point.
So all over the city, you can see trucks that are piled high with rolls of fabric just rocketing down the street. And at the same time, they're being passed by guys with carts and driving vans who are collecting the finished products and taking them to the airport. So there's this whole ecosystem of businesses that are all interconnected in the task of making clothes as quickly as possible.
So it sounds like it's actually a very sophisticated operation, almost like a sort of supercharged Ford assembly line.
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Chapter 7: What impact will closing the loophole have on consumers and manufacturers?
If you can imagine that assembly line spread over an entire city, that is essentially what it is like. So you've got just whole neighborhoods that are geared toward the production of clothes. And This industry is a really important part of the economy there. It employs millions of people, and a lot of them are migrant workers who come to the city from all over China.
So we talked to managers and workers, and what they told us is that business was already down. In the month of April, Xi'an was putting in fewer orders in anticipation of the loophole being closed.
Hmm.
And because of that, factories were hiring fewer workers. Some people said they were considering moving their factories to other provinces where they thought they could pay workers less, or even out of the country to places like Vietnam. And many of the people we spoke to had actually seen nearby businesses close down. Now, we were in Guangzhou on the day the loophole closed.
And one of the people that we talked to was Han Junshou. Junshou is 30, and she is the second-generation factory owner. She makes house slippers and bags and other accessories, and she sells them on Shein and Timu. And one of her most popular products is a pair of fluffy socks.
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Chapter 8: What did Meaghan Tobin observe during her trip to Guangzhou about the garment industry?
She markets as being for pajama parties and girls' nights.
Oh, okay.
And she was telling us how she gets inspiration for her colorways by looking at the colors of outfits that Kendall Jenner posts on Instagram.
This is so cute.
But Jun Cho says that her orders in April were down nearly 20% compared to previous months. And she's already starting to look for other markets to make up for the loss of American consumers. How's she going to do that? Well, if Americans aren't going to buy things because they're more expensive, Jin Cho is going to have to sell her fluffy socks and bags in other places.
So she's looking to Europe and South America. And that's something we heard from other business owners too. There are all these chat forums online that are almost offering like crowdsource tech support. Teaching people how to set up an account in Bahasa Indonesia to target Indonesian customers or what buttons to click to get set up to sell Mercado Libre in South America.
But I imagine it can't be that easy to replace the American market because American consumers just seem to buy so much more stuff than anyone else.
That's right. The US is China's biggest single market. It's a big economy with a lot of consumers who have enough disposable income that they can buy reusable water bottles and strollers and toasters and flash drives and basically anything they need or want from China.
Hmm.
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