New Mexican tariffs threaten Shein and Temu’s low-cost model

Mexico is shaking up its trade policies, and Chinese e-commerce heavyweights like Shein and Temu may soon feel the heat.

Starting January 1, 2025, a new tariff system will impose a 19% duty on goods entering the country via courier from nations without trade agreements, including China—home to these fast-growing platforms.

This change, announced by Mexico’s tax authority (SAT), marks a significant departure from past policies that allowed many low-value items to enter duty-free.

For Shein and Temu, known for their low prices and rapid delivery, the new tariffs could create a major obstacle. Their business models thrive on high-volume, low-cost sales, offering everything from clothing to home goods at prices that often undercut traditional retailers. This has helped both companies scale tremendously. For instance, Shein and Temu were the most downloaded apps in Mexico in 2023, according to digital analytics company Sensor Tower, making the country one of their most important markets in Latin America.

However, with an additional 19% duty, maintaining this competitive edge in Mexico may prove difficult.

The timing compounds the challenge, as a recent December 19 decree also raised import tariffs on a wide array of goods to as much as 35%. Items like dresses, curtains, and blankets—popular products on these platforms—are among those directly targeted.

The Mexican government argue that the measures are necessary to address tax evasion and protect local industries. Over the years, cheap imports have been criticized for undermining domestic businesses, especially in the textile and manufacturing sectors. It has framed the reforms as a way to safeguard local jobs while ensuring that foreign e-commerce companies pay their fair share.

The new tariffs may also disrupt Mexico’s IMMEX program, a longstanding initiative allowing foreign firms to import goods tax-free for manufacturing and re-export. Some industry observers believe that the stricter import duties could complicate operations for companies relying on this program, potentially raising costs for goods destined for U.S. consumers.

Interestingly, platforms like Amazon and Walmart may find themselves in a stronger position. As U.S.-based companies with established operations in Mexico, they benefit from the United States-Mexico-Canada Agreement (USMCA), which offers slightly lower tariffs of 17% for goods valued between $50 and $117.

The changes are part of a global trend of governments pushing back against the dominance of low-cost online retailers. Critics of platforms like Shein and Temu have long argued that their rapid growth has been built on exploiting loopholes in trade policies, giving them an unfair advantage over traditional businesses. By introducing these tariffs, Mexico is taking a firm stance to even the playing field—though at the potential cost of higher prices for consumers accustomed to cheap imports.

Meanwhile, the decree comes as U.S. President-elect Donald Trump threatens a 25% tariff on Canadian and Mexican imports.

As the dust settles, the full implications of these reforms remain to be seen. Will they succeed in revitalizing local industries and protecting jobs, or will they stifle competition and limit consumer choice?