Meaghan Tobin
Appearances
The Daily
The End of Fast Fashion?
won't be able to replicate manufacturing the way that Guangzhou has. That there was no way that Guangzhou wasn't going to be the engine of the global garment industry.
The Daily
The End of Fast Fashion?
Well, President Trump could change his mind. He could pause or reverse his position on closing the loophole altogether. Yeah, that has happened before. Exactly. He's rolled back the tariffs from an additional 145% down to 30%. But that's for most goods coming from China.
The Daily
The End of Fast Fashion?
For the packages that we're talking about, which previously entered the United States without paying any taxes, now they'll be subject to either a tariff of 54% or a flat fee of $100. And more than likely, it's the shopper who will end up paying that extra cost.
The Daily
The End of Fast Fashion?
So that means anything you buy from Xi'an that's coming from China will cost more and could mean that people will buy fewer things and a Xi'an haul might become a little bit more of a mini haul.
The Daily
The End of Fast Fashion?
I mean, that's a big question at the heart of the trade war right now. It's really difficult to say. Like I said, China is an export-driven economy, and this trade war is really bad news for the one area that had been driving growth. But it's also not just a place of manufacturing. It's also a place of innovation. China is quickly becoming a leader in other technologies.
The Daily
The End of Fast Fashion?
In many ways, pushback from the U.S. just pushes China to become more self-sufficient in many areas. And we can see that happening in semiconductors and artificial intelligence. And so it might just be that the garment industry is one of the next places where that happens.
The Daily
The End of Fast Fashion?
And in the end, this could accelerate the shift that the Chinese government hopes it would to helping China become a more consumption-driven economy. And how about the U.S. ? There are several things to consider. This is definitely going to hurt the United States in pure economic terms.
The Daily
The End of Fast Fashion?
Very few economists believe that it will actually create a significant amount of the kind of middle class manufacturing jobs that President Trump has been promising. And like I said, things will definitely get more expensive, and that means Americans will likely buy fewer things.
The Daily
The End of Fast Fashion?
Yeah, that's the story he's telling. And it's a position that extends to some of his administration, too. Scott Besson, the Treasury Secretary, said something really similar, that the American dream is not about having access to cheap stuff. It's about prosperity and upward mobility and economic security. And that for too long, the people making the trade deals have lost sight of this.
The Daily
The End of Fast Fashion?
Right. And what's interesting here is that even people who are skeptical of Trump's tariffs might be in favor of reining in fast fashion for environmental reasons or because they're against overconsumption. And you can actually see that playing out online. We need to stop filling up our closets and fill up our banks.
The Daily
The End of Fast Fashion?
On TikTok, alongside the massive Shein hauls, you can also see people having conversations about consuming less.
The Daily
The End of Fast Fashion?
And being more intentional about where they're buying things from. If there was ever a time to develop an interest in second-hand fashion, I swear now is the time. So the end of the de minimis loophole might result in something that a lot of people agree with, making fast fashion a little harder to buy.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
And so all of that really opened the floodgates into the United States for low-cost goods from China.
The Daily
The End of Fast Fashion?
Yeah, Shein was one of those companies. And also Timu and Amazon and Walmart all took advantage of this loophole to send a lot of small, cheap packages to the United States from China. But it's Shein that really created an entire business model around it.
The Daily
The End of Fast Fashion?
So when Shein first started drawing a lot of attention, people compared it to H&M and Zara, early models of fast fashion. But H&M and Zara, the way their business model worked is they would look at runway trends and order a bunch of clothes in advance and then ship it to warehouses in the United States in bulk. And Shein is totally different than that. It's not actually one single brand.
The Daily
The End of Fast Fashion?
It's an online marketplace that sources from a network of thousands of Chinese factories. And instead of having specific collections for the time of year, they're just constantly creating thousands of different garments every day. And Shein responds essentially in real time to trends.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
And because the prices are so low, it makes the clothes feel almost disposable.
The Daily
The End of Fast Fashion?
And in the United States, a lot of businesses were angry that Xi'an and other companies were using this loophole and not paying any taxes. They felt that was really undercutting their prices. Like, for example, Forever 21 partly blamed Xi'an and Timu and their use of the de minimis exemption when it filed for bankruptcy earlier this year. And all of that concern eventually reached the White House.
The Daily
The End of Fast Fashion?
It absolutely plays into President Trump's narrative that particularly when it comes to trade, the playing field with China has not been even. And Trump also says the de minimis exemption was leading to fentanyl and the chemicals that are involved in making it coming into the U.S.
The Daily
The End of Fast Fashion?
from China because he said drug traffickers were taking advantage of the limited checks on these packages to sneak illegal substances into the country. And all of this is why earlier this month he got rid of the loophole.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
So some places might assemble whole garments and other places will just sew on zippers and ruffles.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
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.
The Daily
The End of Fast Fashion?
So on top of looking abroad for other markets, factory owners like Juncho are also trying to target shoppers in China. And the Chinese government really needs this to happen because the economy has been pretty slow in the last couple of years and exports have really been the main driver of growth. But the problem is people in China have been really careful about spending money.
The Daily
The End of Fast Fashion?
Are you guys going to miss the prices before the tariffs? Let me know in the comments.
The Daily
The End of Fast Fashion?
And Junqiu ultimately sees this as a lose-lose situation. She thinks that not only are Chinese manufacturers going to suffer, but American shoppers are going to also. She said that China makes so much stuff. If you cut out China, where are you going to be able to buy all your products? And she definitely thinks people in the U.S.