How US-China tariff war jeopardises SHEIN-Reliance's global sourcing deal
What's the story
Chinese fast fashion giant SHEIN is reportedly rethinking its global sourcing agreement with Reliance Retail.
The possible scaling back of the partnership comes as China's government discourages local businesses from moving production abroad amid an ongoing tariff dispute with the US.
An executive familiar with the discussions told ET that "a core objective of the Reliance Retail-SHEIN partnership was to establish India as a manufacturing hub for SHEIN's global operations."
Tariff impact
US-China tariff war impacts global sourcing
The tariff dispute between the US and China has resulted in a whopping 145% duty on Chinese goods in the US.
This has raised concerns in China that manufacturers may shift production to countries with lower tariffs, such as India.
In response, the US has temporarily suspended reciprocal tariffs on 75 countries, including a 26% duty on India for 90 days.
Production shift
SHEIN's manufacturing strategy amid geopolitical tensions
Despite global firms such as Apple reducing their dependence on China by moving some production to India, Chinese smartphone brands have not announced plans to shift production out of China.
SHEIN, a leading name in fast fashion and now based in Singapore, still has most of its manufacturing facilities in China.
But it has been keen on increasing sourcing from India as part of its strategy to lessen dependence on China.
Return and collaboration
SHEIN's return to India and partnership with Reliance
SHEIN returned to India in February this year with an app developed by Reliance Retail Ventures.
This was almost five years after it was banned in India amid increased border tensions between the two countries.
The SHEIN-Reliance partnership was aimed at more than retail, including establishing an export platform for Indian MSMEs (micro, small and medium enterprises) engaged in garment and textile manufacturing.
MSME collaboration
SHEIN's commitment to Indian MSMEs and technology sharing
SHEIN had pledged to share technology and expertise with Reliance, hoping to integrate around 25,000 MSMEs into a parallel global supply chain from India.
However, the initiative now hangs in the balance with the latest directive from Chinese authorities.
Commerce and Industry Minister Piyush Goyal had previously stated that "an indigenous retail platform for SHEIN would be hosted on infrastructure with SHEIN having no access to, or rights over, data."
Financial outlook
SHEIN's financial performance and future prospects
SHEIN's full-year sales grew 19% to $38 billion in 2024. The global fashion retailer operates in over 150 countries with over 250 million social media followers.
India's fast fashion industry, according to a Redseer Strategy Consultants report, is projected to be worth $50 billion in sales by 2030-31, which could mean growth opportunities for companies like SHEIN.