THE REAL REASON WHY SHEIN AND TEMU ARE GETTING EXPENSIVE

So if you haven't heard (or seen) Shein and Temu are getting expensive. Thats right. The massive e-commerce retail companies, which are known for being cheap, are getting expensive. And if you have TikTok, you already know people aren't too happy with this news. However, what you might not know is that these prices aren't rising due to tariffs, but rather something else.

Here’s the thing. Cheap stuff is generally imported without any sort of duties. And that's because of the de minimis exemption. It's de minimis btw not de MINIMUS, just clarifying because for months I was calling it de minimus like it was that Disney cartoon horse. Anyway, here’s the textbook definition: De minimis exemptions refer to thresholds below which imported goods are exempt from duties and/or taxes. If you understood that then good for you. But if you didn't then I’ll sum it up: If a good is cheap af, it is imported without any extra charge like duties or tariffs. 

The real question is how cheap is cheap-enough-to-be-duty-free? It differs. For the US, it's $800 and for the UK it's £135. Basically, anything that is imported into the US is duty-free as long as it is under $800. And something from Shein and Temu being over $800 is unlikely.

Well, that's changing now. President Trump signed an Executive Order on April 2nd eliminating duty-free de minimis treatment for low-value imports from China starting May 2nd, 2025. Why? Well, it was to combat the influx of illicit goods entering the US and to get rid of the “big loophole” that benefitted Shein and Temu. The real question now is how much tariffs Shein, Temu, and similar others would be subject to?

It depends on how they ship their items. Typically there are two types of shipping networks: the International Postal Network and private air cargo and commercial couriers. International Postal Service is basically stuff like USPS (USA), China Post (China), India Post (India), Royal Mail (UK) etc, which is basically government-run mail system. On the other hand, you have commercial services like FedEx and DHL.

Now here’s how much tariffs goods would be subject to depending on the way they’re shipped.

TL;DR? If an item is shipped using commercial services (FedEx, DHL) then it is subject to the 54% tariff that was imposed on China on May 14th along with any other applicable duties. And if it is shipped using international postal network then it is subject to a duty rate of either 30% of its value or $25 per item ($50 per item from June 1 onwards). 

So its effect on Shein and Temu would depend on how they ship their stuff so let's look at it.

1. Shein

Shein typically uses the international postal network. Orders are shipped from China using China Post and then handed to USPS for delivery to customers. So it would face the 30% or $50 per item duty. What determines where it would face 30% of its value or $50 per item? That depends on how pricey the item is. If it is valued at say $120 then 30% of it is $36 which is less than $50 so it would be subject to the $50 flat fee. But if it is valued at $200 then 30% of it is $60 which is more than $50 so it would be subject to a $60 fee.

Shein also has what's called express shipping service which, if you use Shein you already know, means faster delivery. In the US, typically takes anywhere within 7-15 business days but with express shipping, it would take just about 3-7 business days. And this express shipping uses commercial services for delivery so it would be subject to the 54% tariff.

It also has regional warehouses in the US in order to fulfill orders locally whenever possible but the majority of items still need to be shipped since the warehouses only serve to high demand items

2. Temu

Temu primarily uses commercial services. USPS is used but for domestic purposes. Meaning if they have the item in their US-based warehouse it would be delivered using USPS. If it needs to be shipped from China, it will use commercial services.

Either way, they’re facing some sort of duty. And they despise it as much as their customers do. Because obviously, the last thing they want is to lose customers. So it's safe to say that they’re scrambling to look for other options. Shein is trying to diversify its market to other countries to reduce dependency on the US. Other than that it is also shifting production to Ho Chi Minh, Vietnam which doesn't face the low-value shipment duties yet. And then of course it is trying to absorb the cost. Temu, on the other hand, completely ceased shipments from China and is relying on its US-based warehouses to fulfill deliveries. Both e-commerce giants are moving towards bulk shipping to restock warehouses in the US instead of individual air shipments.

So yeah, if you live in the US it's better if you just go to your local thrift store because they are cheap and nice (no this isn't sarcasm).

Thank you for taking some time off to read the 867 words so far and go thrifting!

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INFLATION ISN'T THE VILLAIN YOU THINK IT IS

 Recently, I came across a video by the Wall Street Journal explaining why China’s deflation is more dangerous than inflation. It was an insightful video, so naturally, I thought the comments would say the same. Turns out, I was wrong. Most comments seemed to see no problem with deflation.

This is what almost every person in the comment section believed. They were like cheers to deflation while tomatoes to inflation. And it made me wonder, do people actually know what deflation means, or are they just looking at a mirage? Naturally. I, being a very talented, sophisticated-minded person (I wish), decided to write about it. So, ladies and gentlemen, here is why inflation is a good thing.

Prices rise. That’s the universal truth. And a lot of people don’t like it, which makes sense when you think about it. Knowing that you’re buying a good that would be more expensive as time passes? Yea. Not really fun. But here’s why inflation is actually a good thing when it's in control. 

Inflation equals a price increase. That $500 laptop you bought today? By next year, it would probably be $510. Not because suddenly it has become really popular, but because of inflation. This pisses people off. “So I’m paying $10 extra for nothing?!” That’s the thought process that goes behind it. But here’s the good part. Inflation, when it's in control, is accompanied by an increase in wages.

So rather than this:

It's more like this:

Because obviously when prices rise, employees need more money to spend (they need to pay those bills), so their wages rise, they spend, and in a chain reaction, companies earn more money.

Now, around 2% inflation = a good and healthy economy. It shows that there is demand and growth. Keep in mind that only GRADUAL inflation is good. That drastic spike and plunge, those are UGLY. Take this piece of data from the US Bureau of Labor Statistics, for example.

This is the average price data for the past two decades. In case you were wondering, those areas with the grey background show a recession. Notice that massive drop in 2008? And the comparatively-less-but-still-very-significant drop in 2020? Yeah, that’s the 2008 recession and the pandemic recession, respectively. Now, this looks really messy but if you look closely (by which I mean squint the way you do when your sibling turns on the light in your room just as you’re about to fall asleep) you’d notice that most of items have this small upward slope in their graph, proving my point that prices constantly and gradually rise. But….there are also some others, like the graph for gasoline, which looks like a whole rollercoaster.

Absolutely no pattern. It's like a bunch of random peaks and drops.

And then some look like straight up flat lines (bananas and electricity)

Explanation? The price of bananas hardly changes in the US, they’re mostly imported from countries where they are mass-produced at a low cost. They’re grown year-round and easy to ship. And the graph for electricity only looks like a flat line when it's compared to other items, but when selected individually….

Yea. Clearly NOT a flat line.

In short, there is an upward trend in prices.

But what happens when there is a sudden peak or drop in prices, i.e, excessive inflation or deflation? The central bank steps in. Say there is crazy deflation, the first thing that the central bank is gonna do is lower interest rates. Why so? Because if people are charged less interest, they would be willing to take loans and buy stuff, which means more demand. Similarly, in case there is crazy inflation, the central bank would increase the interest rates so that people buy less, which slows down the demand, and companies are forced to lower their prices. And I know it seems crazy because imagine not being able to afford your damn groceries and here intervenes the Fed like ‘guess what? Loans gonna be difficult too’ but that’s what they gotta do to avoid plunging into a recession.

In short: EVERY YEAR PRICES HAVE TO RISE A LITTLE (ALONG WITH WAGES, because they go hand in hand like two peas in a pod)

A question that might arise is that if they do go hand in hand, why keep increasing? Like you know what, just don’t change either. No inflation and no change in wages. And that might seem like a good idea in theory, and only in theory. I’ll give a couple of reasons why it's not a good idea:

1. Lack of demand:

See, right now if you want to purchase a car, you’ll be like ‘okay lemme buy it right now instead of delaying because next year it's going to be a little more pricy’. BUT, if people KNOW for a fact that prices are gonna stay constant, they’re gonna be like ‘meh, lemme just buy that car next year’ because it's not like it's gonna cost more. So, unless something is urgently needed, people won't bother buying it. That’s gonna slow down demand and ultimately the overall economy.
   
     2. No increase in wages.

In theory, it might seem that if people can afford a good standard of living with the wages they currently have, then they won't want a higher wage. Except it's not. Because that would just piss off people. Imagine working at a place for years, but you’ve never gotten a salary raise. Obviously, that’s not gonna be fun. But your company can't afford to raise your salary because they don’t earn that much. And they don’t earn much because the prices are constant. But say if they increase the price a tiny bit, then they can afford to increase their workers' wages or something else, like upgrade some stuff, open a new branch, get renovations done, or something like that, which means more room for business, and more room for money.

And then there is this very interesting situation called a liquidity trap. Sounds complex, I know, but hear me out on this one because it's very interesting.

A liquidity trap is a situation where inflation is either negative or super low. The economy is slow as a sloth, and people aren’t buying (not cause they broke but because they believe that prices would go down further and/or never really change, so what’s the hurry in buying). The central bank/government is DESPERATE to wake up the economy. They would lower the interest rate in hopes that people would borrow some money and spend it. But it still doesn’t work. THAT is a liquidity trap. Prime example? Japan during the 1990s. Ever heard of The Lost Decade? It was a liquidity trap.

By now, I’m assuming (by which I mean hoping and praying) that you see why deflation isn’t really what it sounds like. It's like a mirage. Most people look at it from afar and assume it's a good thing, when in reality, it's not. So, unless you want to go broke, don’t hope for deflation

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Thank you for taking some time off to read the 1089 words so far (unless you are broke or unemployed, in which case you better read my blog because the only thing worse than being broke is being broke and having zero economic knowledge)

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