Shein’s London float in danger as Trump tariffs target US tax loophole

Shein’s £50bn London IPO plans could be in danger after Donald Trump set his sights on closing a tax loophole that allows retailers like Shein to avoid tax charges in the US.Trump is set to scrap the ‘de minimis’ rule, which allows small packages worth less than $800 (£645) to be shipped from China, Canada and Mexico to the US duty-free, as first reported by Bloomberg. 

Under the current rules, small packages mailed directly to home addresses in the US avoid import taxes, allowing retailers like Shein and Temu to avoid paying customs duties by shipping small orders directly to customers. 

However, White House officials have criticised the “overuse and abuse” of the de minimis rule.

While Trump has now delayed what would have been imminent tariffs on Mexico and Canada, his executive order over the weekend setting out plans to scrap the de minimis rule suggests he is still preparing for a tax clampdown, according to The Telegraph.

The clampdown could lead to much higher duty costs for Shein, as the majority of its US sales are shipped in small packages, and could therefore cast doubt over whether the company decides to move forward with its London flotation. 

The Telegraph noted that investors who are expected to buy shares in the company when it lists will want assurances about the reliability of its forecasts, which will be difficult to provide given the uncertainty over the tax changes and possible impact on sales.

In addition, the London listing has also been endangered as Shein faces scrutiny over alleged abuses in its supply chain.

Earlier this week, The Telegraph reported that campaigners from Stop Uyghur Genocide have launched a judicial review process to block Shein’s planned float, after it claimed alleged evidence shows that Shein has benefitted from forced labour. 

Shein has denied the claims, and said it “strictly prohibits forced labour in its supply chain globally”.

Officials from the company were called before the business and trade committee last month to address questions over where it sourced materials.

MPs on the Business and Trade Committee were left “horrified” after a representative for Shein could not answer questions over where the business sources its cotton from.

Shein’s general counsel for Europe Middle East Africa (EMEA) Yinan Zhu was asked several times whether the company uses cotton supplied from China to which she responded that she would have to write to the committee with an answer.

Last month, it was reported that Shein was planning to list in London in the first half of the year, according to sources that spoke to Reuters. If the move gains regulatory approval, an IPO could be completed as early as Easter on 20 April, one source said.

A second source told Reuters that Shein is working towards listing in the first half of this year, but that a definitive timeline is not yet set. 

Shein has been contacted for comment.