Shein reported a $99 million quarterly loss as U.S. and EU tariffs disrupted its e-commerce model, pushing the fast-fashion giant to proceed with a Hong Kong IPO despite regulatory hurdles and supply chain controversies.
Shein, the Singapore-based fast-fashion giant, reported a $99 million loss in the first quarter of 2026, marking a sharp decline from a $395 million profit in the same period the previous year. The drop coincided with the removal of the U.S. de minimis exemption, which had allowed small packages under $800 to enter the country duty-free, and new European Union tariffs on low-value imports. The company is now preparing for a Hong Kong IPO, having shifted from stalled plans in New York and London due to regulatory scrutiny.
Tariff Pressures and Market Shifts
The U.S. decision to eliminate the de minimis exemption in May 2025 had a “adverse impact” on Shein’s sales, the company said in its IPO filing. Chinese-origin products sold by Shein or through its marketplace are now subject to tax rates ranging from 10% to 87.5%, according to the filing. This followed a Trump-era executive order that broadened the exemption’s removal to cover global shipments, not just those from China and Hong Kong. Shein’s U.S. revenue fell 14.3% to $2.04 billion in the first quarter, with the U.S. accounting for 22.5% of quarterly revenue—a decline from 29.4% in 2023.
The company warned that Europe, which accounted for about a third of its 2025 revenues, could face similar impacts to the U.S. It is possible that trends in the EU could be generally in line with or exceed the impact observed in the U.S. after the removal of the U.S. de minimis exemption,
the filing stated. Shein’s U.S. revenue decline and the EU’s new tariffs highlight the growing trade barriers threatening its business model.
IPO Strategy and Regulatory Hurdles
Shein’s planned Hong Kong IPO, approved by the China Securities Regulatory Commission in July 2026, represents a strategic pivot after failed attempts to list in New York and London. The company cited regulatory scrutiny in Western markets as a reason for the shift. Chinese companies listing in New York or London tend to attract more political and regulatory scrutiny, whereas Hong Kong is seen as more safe,
said Lerong Lu, a law professor at King’s College London, in a Reuters report.
The IPO filing, released on July 27, 2026, did not specify the size, pricing, or timeline of the share sale but outlined the company’s financial challenges. Shein’s 2025 net income fell 38.7% to $2.06 billion, while revenues grew 8% to $41.85 billion. The company also took a $328 million accounting charge related to convertible preferred shares, which can be converted into ordinary shares before listing. Despite these hurdles, Shein aims for a valuation of $40 to $50 billion, far below the $100 billion it reportedly commanded in a 2022 funding round.
Supply Chain Controversies and Reputational Risks
Shein’s Hong Kong IPO filing avoided specific mention of supply chain risks linked to Xinjiang cotton, a topic that previously blocked its U.S. and UK listings. The company’s prospectus noted general risks of negative publicity associated with our brand, business partners or industry,
but did not address allegations of forced labor in its supply chain. China has repeatedly denied such claims, and Shein has maintained that its operations comply with international labor standards.
The omission of Xinjiang-specific risks reflects the company’s effort to navigate politically sensitive issues. In 2025, Shein’s EMEA general counsel, Yinan Zhu, avoided answering parliamentary questions about the source of its cotton during a UK hearing. The Hong Kong filing emphasized the company’s Large-scale Automated Test and Reorder (LATR)
inventory system, which it claims minimizes production and keeps inventory levels low. However, the prospectus did not address concerns about labor practices or environmental impacts raised by critics.
What Comes Next: IPO Timeline and Global Trade Tensions
Shein’s Hong Kong IPO is expected to proceed in the coming months, with the China Securities Regulatory Commission’s approval clearing the way for the listing. The company’s filing also highlighted its reliance on 7,500 contract manufacturing partners and its focus on expanding global presence. However, ongoing trade tensions and regulatory pressures in key markets like the U.S. and EU could continue to affect its growth.
Investors will be watching the IPO’s outcome as a test of confidence in Shein’s ability to adapt to shifting trade policies. The company’s ability to offset higher costs through price increases and operational efficiencies remains uncertain. For now, the filing underscores the challenges of operating in a global market where tariffs, regulatory scrutiny, and reputational risks are increasingly intertwined.
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