Economy
Shein finds China hard to replace as Vietnam experiment fails
Just over a year ago, Chinese ultra-fast fashion retailer Shein began leasing 15 hectares of warehouse space near Ho Chi Minh City – about the size of 21 football fields – as part of a grand experiment to make Vietnam a major export base.
When it was formulating those plans in late 2024, it seemed like a bet that, while risky, was worth making.
U.S. exemptions for duties on small parcels from China that underpinned its business model looked as if they would be abolished, Donald Trump had just been elected U.S. president for a second term and fears of a heightened trade war were soon realized, with U.S. tariffs on many Chinese goods rocketing to 145% by April 2025.
Shein started encouraging its biggest Chinese suppliers to set up manufacturing bases in Vietnam.
But things did not go to plan.
Today, IPO-bound Shein, known for selling $5 tops and $10 dresses, is drastically scaling back in Vietnam, according to a Reuters report, citing six people familiar with its operations there.
At 15 hectares, the bonded logistics hub was the largest of its kind in the country and used to employ thousands. The lease now covers 6 hectares, according to two of the sources. A separate person with direct knowledge of the matter said a third of the originally planned site is in use.
Mass layoffs began in April and more are expected, warehouse workers said, adding that some teams have retained one in four employees, while others lost even more. During a Reuters visit to the site in late July, only a handful of workers were present and just a few trucks were parked at its warehouses. Nearby warehouses operated by other tenants were bustling with activity.
Its sharp U-turn in Vietnam, which has not previously been reported, reflects abrupt changes in U.S. trade policies while underscoring how dependent Shein’s business model is on Chinese suppliers, which put up with terms that manufacturers in other countries won’t – a pattern Shein has also seen play out in Brazil.
It also highlights how Shein is hewing more closely to its Chinese roots. Having unsuccessfully sought listings in New York and London and moved its headquarters to Singapore as it expanded globally, the company is now pursuing a Hong Kong IPO while deepening its commitment to its manufacturing base in southern China.
De minimis pain quite major
The first and biggest hit to Shein’s Vietnam plans was the end of the U.S. de minimis duty-free exemption for shipments under $800 from all countries, not just China. Trump ordered the move on July 30, 2025, and it took effect a month later, only a few months after the exemption for shipments from China ended.
Then, sky-high U.S. tariffs on Chinese goods gradually came down. Vietnamese apparel is still subject to smaller tariffs than Chinese clothing, but the advantage is no longer as large as it used to be.
A knit polyester dress, for example, imported from either Vietnam or China is subject to a 16% duty, but the Chinese item would be hit with Section 301 tariffs imposed for alleged unfair trade practices that could lift the effective rate to around 33.5%.
Last month, both China and Vietnam were hit with new U.S. tariffs of 12.5% for allegedly failing to prevent imports of goods made with forced labor – a decision that puts Vietnam at a disadvantage to other Southeast Asian nations with big apparel sectors and further undermines the case for Shein’s suppliers to set up shop there.
Home base unmatched for speed, low margins
It’s not all about tariffs. Finding Vietnamese workers willing to work long hours for low wages has proven difficult, sources at Shein’s Chinese suppliers say.
Shein’s vast network of suppliers in China produces millions of styles in small batches at margins of as little as 1 yuan ($0.15) per piece, with orders fulfilled in days and quickly reordered if the company’s 273 million shoppers take a liking to them.
“Sourcing diversification beyond China has practical limits, especially for companies like Shein whose competitive advantage depends on speed, flexibility, and extremely small production runs,” said Sheng Lu, professor of fashion and apparel studies at the University of Delaware.
Many suppliers that went to Vietnam have come back, said a factory manager with the surname Wen in Guangzhou’s Panyu district, home to “Shein villages” that comprise thousands of small garment factories.
“They realized that despite the smaller U.S. tariff rate on Vietnamese goods compared to Chinese ones, the low efficiency still makes it less viable than manufacturing in China,” Wen added. He declined to give his full name, saying Shein had warned suppliers not to speak to the media.
Authorities in Guangzhou, keen to protect local jobs, were also not happy with Shein’s efforts to subsidize Chinese manufacturers opening plants in Vietnam, and in mid-2025 warned it against moving orders significantly away from the region, according to a source with direct knowledge of the matter.
Shein is now investing further in Guangzhou and the broader Guangdong province, with CEO Sky Xu making a rare public appearance in February to pledge spending of over 10 billion yuan ($1.5 billion) on a smart supply-chain system in the region.
Commitment doesn’t go both ways
But while Shein has recommitted to China, some domestic suppliers are not necessarily recommitting back as demand slows. Shein’s draft prospectus showed a 14% slide in U.S. revenue during the first quarter due to the end of the de minimis exemption.
Wen and three other suppliers said orders from Shein were either stagnant or showing only a little growth. Demand is expected to further slow after the European Union last month imposed a 3-euro ($3.46) duty on low-value e-commerce imports.
Ping He, who has worked in operations management for Shein and TikTok Shop, said thousands of Shein’s smaller suppliers have begun supplementing their income by opening stores on PDD Holdings-owned Temu or Amazon.
“Shein is not the prettiest boy in town anymore. There are many more options now,” she said.
Other suppliers are returning to larger orders with longer lead times.
“Shein’s profit margins are just too thin … their order volumes are quite small, often just dozens of pieces at a time, which makes production a hassle. So we decided to drop them,” said Yang, a manager at Jiang Gong Clothes, a factory in Panyu that worked with Shein until a few months ago.
Opel is moving production of its light commercial vehicle model Combo to Türkiye from the third quarter of this year, the German automaker said Monday.
The announcement comes just two weeks after another Stellantis-owned carmaker, Peugeot, said it would begin producing its Rifter light commercial vehicle in Türkiye.
The Combo will be manufactured at a Turkish carmaker Tofaş’s plant in the northwestern Bursa province. Peugeot’s Rifter will also be produced at the same factory.
The Bursa plant will add the Combo to Opel’s locally produced commercial vehicle lineup, following the start of production of the Zafira, Vivaro and Vivaro Van models at the facility.
Opel Türkiye Brand Director Yiğit Yantaç said restarting production in Türkiye carried both strategic and emotional significance for the brand.
“Bringing the Combo to life in Bursa with Turkish engineering and Tofaş’s manufacturing strength brings together two different engineering cultures,” Yantaç said.
Local production is expected to improve efficiency across Opel’s supply, logistics and operational processes.
Combo leads Opel’s commercial vehicle sales
The Combo accounts for a significant share of Opel’s light commercial vehicle sales in Türkiye.
Opel sold 27,471 light commercial vehicles in the country in 2025, making it the third-best-selling brand in the segment. Combo sales accounted for 15,722 of those vehicles.
The latest Combo features Opel’s signature Vizor front design, a digital cockpit and advanced driver-assistance systems. It is also equipped with Intelli-Lux LED Matrix headlights.
The model is offered in Essential, Edition and Ultimate trim levels and is powered by a 1.5-liter diesel engine producing 130 horsepower, paired with either a six-speed manual or eight-speed automatic transmission.
Combo maintained its sales momentum in the first seven months of 2026, with 7,779 units sold and an approximately 15% share of the C-Combivan segment.
Demand conditions across Türkiye’s key export markets strengthened at the fastest pace in eight months in July, driven by renewed growth in major European economies and stronger activity in the United States, a survey showed Monday.
The Türkiye Export Climate Index, compiled by the Istanbul Chamber of Industry (ISO) and S&P Global to measure business conditions in the main export destinations of Turkish manufacturers, rose to 52.2 in July from 50.4 in June.
Readings above 50 indicate improving business conditions in export markets, while those below 50 point to deterioration.
The July reading marked the greatest improvement since November 2025 and extended the index’s uninterrupted expansion that began in January 2024.
The survey showed economic activity increased in eight of Türkiye’s 10 largest manufacturing export markets during July, with only France and Poland recording contractions.
Germany, Türkiye’s largest export destination, returned to growth for the first time in four months, albeit at a modest pace.
The United Kingdom also resumed expansion. Together, Germany and the U.K. account for around 15% of Türkiye’s manufacturing exports.
Rapid growth in U.S, Europe
The United States posted its fastest rate of economic growth in nine months, while Italy recorded its strongest expansion in eight months. Economic activity in Spain accelerated to its highest level in about 18 months.
Elsewhere, growth strengthened in the Netherlands and the United Arab Emirates (UAE), while Romania’s manufacturing sector returned to expansion after 25 consecutive months of contraction.
Although economic activity declined in France and Poland, the pace of contraction eased compared with June.
Among all economies monitored by the survey, Egypt recorded the steepest contraction in output, though the decline was the mildest since March. Uganda registered the fastest growth, followed by Thailand and Singapore.
Outlook improves despite geopolitical risks
Andrew Harker, economics director at S&P Global Market Intelligence, said the latest data suggest the global economy started the second half of the year on a firmer footing, creating better opportunities for Turkish exporters.
“Growth signals from some of Türkiye’s key export markets clearly show that the global economy made a positive start to the second half of the year,” Harker said.
“Most major export markets either returned to growth or saw stronger expansion in July. These developments provided manufacturers with more opportunities to secure new business,” he added.
However, Harker said continued uncertainty surrounding the Middle East suggests the outlook could remain volatile in the coming months.
Türkiye’s industrial production expanded in the second quarter despite challenging global conditions, Treasury and Finance Minister Mehmet Şimşek said Monday.
Şimşek’s remarks came after the Turkish Statistical Institute (TurkStat) data showed industrial output grew 1.9% year-over-year in the April-June period.
In a post on X, Şimşek highlighted what he said was continued growth in high-technology manufacturing and an improving export mix.
He added that production in high-technology industries increased 3.9% in the second quarter, while the share of medium-high and high-technology products in manufacturing exports reached 44.5% as of June.
“The strong increase in value-added production and the improvement in the composition of exports are concrete indicators of the transformation taking place in industry,” Şimşek said.
“Through our productivity-focused policies, we will continue moving up the global value chains,” he added.
The TurkStat data showed the industrial production index fell 1.4% year-over-year in June, the steepest annual decline since January 2026.
On a monthly basis, however, industrial output edged up 0.1%.
According to TurkStat, manufacturing output, the largest component of industrial production, declined 1.5% from a year earlier in June, while mining and quarrying production fell 1.6%.
Output in the electricity, gas, steam and air conditioning supply sector rose 1.1% on an annual basis.
Compared with May, mining and quarrying output declined 0.5%, manufacturing production was unchanged, while electricity and utilities output increased 1.5%.
Istanbul Airport has set a new all-time high for daily passenger traffic at both the Turkish and European levels, a top official said Monday.
Türkiye’s largest airport and one of the biggest civil aviation hubs in the world handled 289,732 passengers on Sunday, Transport and Infrastructure Minister Abdulkadir Uraloğlu said.
The hub thus “once again set a new all-time daily passenger record for both Türkiye and Europe,” Uraloğlu said in a post on X.
“With the robust transportation infrastructure we have established, we are reinforcing Istanbul’s position as a global aviation hub,” he noted.
The figure renews the previous peak registered a week ago when Istanbul Airport served 289,260 passengers.
The gleaming glass-and-steel structure along the Black Sea coast turned into one of the most important transit centers in aviation since it became fully operational in April 2019.
The hub can handle 90 million passengers a year in the current phase. The figure is nothing compared to its potential capacity to serve 200 million after completing all phases.
Istanbul Airport served record-breaking 84.4 million passengers in 2025, making it the second-busiest airport in Europe after Heathrow Airport and the eighth-busiest worldwide. It seeks to reach the 90-million mark this year.
Sabiha Gökçen also posts record traffic
Across the city, Türkiye’s second-largest airport also recorded its busiest day on record.
Istanbul Sabiha Gökçen International Airport handled 935 flights and 179,789 passengers on Sunday, its operator HEAŞ said Monday.
The previous record, set a week ago, stood at 919 flights and 174,325 passengers.
Sabiha Gökçen was Europe’s fastest-growing aviation hub in the first half of 2026, according to ACI Europe.
HEAŞ General Manager Faruk Kacır said the new record highlighted the airport’s operational capabilities and service quality.
“The historic record we achieved on Aug. 9 is the clearest indicator of our airport’s operational capacity, commitment to seamless service and the confidence our passengers place in us,” Kacır said.
He added that Sabiha Gökçen would continue to strengthen its contribution to Türkiye’s transportation infrastructure and tourism sector while maintaining safe and uninterrupted operations.
For those in Europe who still saw climate change as a problem for future generations, this summer’s intense heatwaves have made clear that its expensive and life-altering economic consequences have already begun to unfold.
Record heat and droughts this summer – which scientists say are exacerbated by global warming – have wreaked havoc in power production, shipping and public health systems, while this wildfire season is on track to be Europe’s biggest ever.
Together, the hit to the region’s economy can already be measured in the hundreds of billions of euros, economists and academics estimate. But they warn this is just the beginning, as costs are set to rise faster than temperatures.
Climate is changing more rapidly in Europe than on any other continent and the damage is already stretching public finances, setting off wild swings in inflation, redrawing the tourism map, and forcing the bloc to rethink how power is produced and how goods are transported.
“What makes 2026 particularly worrying from an economic perspective is that there are multiple episodes of extreme events,” said University of Mannheim economist Sehrish Usman.
“Take heatwaves, droughts, wildfires… these events are taking place at the same time and mostly in the same regions, compounding their impact,” she said.
Record economic damage from heat
Temperatures hit records in June and July, and the economic damage will likely exceed all previous marks, economists say.
Traffic on the Rhine and the Danube rivers, key cargo arteries, is severely limited because of low water levels, and more than a half dozen nuclear generators have shut or curtailed production due to cooling difficulties.
Agricultural yield estimates have been cut, with crops harvested late, such as maize and sunflower, suffering a 6%-7% loss already in July. Heat curtails human productivity and has already claimed tens of thousands of lives, with Germany alone reporting more than 10,000 heat-related deaths.
Meanwhile, the costs of the emergency response, like fighting fires or curtailing power use, further stretch budgets.
ING estimates that the halt of traffic on the Rhine alone will lower the GDP of Germany, the world’s third-largest economy, by 0.3 percentage points this year, while Hungary’s MBH Bank sees a 0.1 percentage point GDP hit for every week the country’s largest nuclear generator is offline.
Allianz, the German insurer, estimates the two-week June heatwave alone will cut the GDP of Europe by 0.3 percentage points, and climate change will shave 5%-7% off growth by 2030 for the most exposed economies like Spain, France and Italy.
“The total bill for this year will be much larger,” said Hazem Krichene, an economist at Allianz. “This figure doesn’t account for the fires, droughts, different flood events or the expected El Niño.”
Given that the eurozone is expected to grow just 1% this year, the hit is sizable.
Yet Usman says the full extent of the economic damage will only be felt several years down the line.
“You’d expect the damage to be largest in the year an extreme event happens and then to fade but we find the opposite,” Usman said. “The economic impact grows over the following years because the extreme weather set off a chain of slow economic consequences.”
Southern Europe to suffer falling tourism and rising inflation
Southern Europe could take the biggest hit as temperature spikes are the largest there, cutting tourism income, exacerbating crop failures and inducing outward migration.
“Can you see tourists marching through southern Italy or Spain in 45 degrees? I can’t. So, I think the nature of tourism will change,” ING economist Carsten Brzeski said.
The south may get more year-round tourists, but summer peaks will drop as vacationers move north, hitting the southern hospitality industry, Brzeski argued. The south will also take a bigger food price hit from extreme weather, complicating life for the European Central Bank (ECB), which is already struggling to keep inflation at target.
“You see bigger effects of extreme temperatures on food prices in places that are already hotter, so if you’re in Southern Europe, you’ll see a bigger effect,” said Maximilian Kotz, a researcher at the Barcelona Supercomputing Center.
Extreme heat in 2022 lifted eurozone inflation by 0.34 percentage points via higher food prices, with the south taking a disproportionate hit, Kotz estimated.
Meanwhile, a halt in river transport is making it harder for fuel to reach parts of Europe, widening regional price differences.
Heat strains on budgets to put pressure on ECB
“The fiscal consequences fall most heavily on the economies least able to absorb them,” Allianz said in a research note.
Reductions in annual tax revenue from lost output could reach 1.8% in France, 1.3% in Italy and Spain as progressive tax systems mean revenues fall faster than output, it estimates.
Business profit margins will also decline, depressing investment and exacerbating the economic loss.
Costs meanwhile surge, both because governments have to fund the emergency response and must invest, such as in future-proofing power generation or transportation routes.
“A key concern is that countries still rely far too much on ad hoc emergency response, which is both expensive and also often quite inefficient,” said Heather Grabbe, a senior fellow at the Bruegel think tank.
But investors may push back if governments try to spend more. Debt levels are already high – especially in France and Italy – and countries need to invest in defense and the green energy transition.
The dilemma could draw in the ECB, which bought up trillions of euros worth of countries’ debt in the past decade to keep borrowing costs depressed when inflation was too low.
“With such a long list of spending needs, the trend will be towards higher government debt,” ING’s Brzeski said. “This will then mean pressure on the ECB to step in and do more quantitative easing, if there is a sudden selloff in bond markets.”
The newly signed defense pact between Türkiye, Saudi Arabia and Pakistan heralds not only a strong new security alliance but a multidimensional partnership that could help unlock new economic and investment opportunities across a wider region, analysts say.
The trio, which already harbors robust defense ties, inked on Friday in the Muslim holy city of Mecca the agreement, which stipulates that an armed attack on one signatory would count as an attack on all.
And while the “Mecca Joint Defence Agreement” is intended to strengthen collective deterrence against any act of aggression, the deal is not merely seen as a collective defense commitment but as a step that brings Ankara, Riyadh and Islamabad even closer.
Recent years have witnessed Ankara building on defense cooperation with both. In 2023, Riyadh agreed to buy Turkish drones in what Ankara called its largest defense export contract.
Similarly, Türkiye and Pakistan have expanded defense cooperation through naval projects, military training and other joint programs. In 2018, the duo launched the MILGEM project that foresees the delivery of four corvettes to Pakistan’s Navy, two of which, made in Türkiye, have already entered the force.
At the same time, the Mecca treaty is seen as having significant potential not only in the security field but also in terms of economy, energy, and trade.
The ongoing conflict between the U.S. and Iran, which has strained vessel passages through the strategically important Strait of Hormuz and recent pressure in the Red Sea have reinforced the need for alternative energy routes, and Türkiye has been positioning itself as a potentially strong leader.
While Ankara has been advocating for the expansion of a critical pipeline with Iraq further to the south, it also said it could be seen as a hub in the region, owing to its contracts and expanding oil and gas partnerships in the different regions.
‘Economic benefits’
“The defense agreement signed here is actually more than just a defense agreement; it’s an agreement that will have very significant economic benefits for the future. I believe it will have very important effects, especially considering that Türkiye, Pakistan, and Saudi Arabia are powerful countries in the region and have a deterrent effect,” an analyst, Zekeriya Şahin, told Turkish publication CNN Türk.
“Now, when evaluating this agreement, it’s necessary to consider separately the finalized economic revenue and the potential revenue stream that could arise after the Mecca Defense Agreement. And with that, I also foresee that, given the current congestion in the Strait of Hormuz in the Persian Gulf, other Gulf countries may join this trilateral agreement in the future,” he argued.
Foreign Minister Hakan Fidan said on Saturday that Egypt might join the pact as well.
“In other words, this strategic agreement could even lead to a new Gulf pact. This would, of course, also mean a strengthening of commercial relations, and one of Türkiye’s strongest areas is the defense industry, and we are in a position to transfer technology and even form partnerships in the defense industry,” Şahin added.
Türkiye, with its advanced technology and defense expertise, stands as the 11th largest exporter of arms globally, and officials are suggesting it is closing in to enter among top 10.
But apart from defense potential, Türkiye in general has steady trade relations with its Gulf partners, while it also aims to further lift bilateral volume with Pakistan.
Last month, Istanbul hosted a large Pakistan-Türkiye Business Conference, where officials from both countries emphasized the potential to further strengthen economic cooperation in a number of fields, from logistics, energy, to IT and artificial intelligence.
“The three countries are unusually complementary,” Andreas Krieg, a lecturer in security at King’s College London, told Agence France-Presse (AFP).
Trade relations, potential
Türkiye’s strong diplomatic and commercial ties with the countries members of the Gulf Cooperation Council (GCC) have positively reflected on recent trade figures, as exports to the region surged 35.7% year-over-year to surpass $826 million in June.
Saudi Arabia recorded the largest increase in export value in June compared with the same month in 2025, rising by approximately $229.8 million, the data sourced from Türkiye Exporters Assembly (TIM) reveals.
Saudi Arabia has, thus, become Türkiye’s largest Gulf export market and the country recording the strongest export growth in the region – the performance which is attributed to bilateral ties but also to the kingdom’s Vision 2030 program.
In this regard, the role of globally-renowned Turkish contractors plays an important role and carries significant potential.
Coupled with the potential of the proposed Development Road Project, which foresees Türkiye as a key link for intercontinental trade, the defense pact could reap economic benefits for the actors in the region.
Among others, Türkiye’s robust and expanding economic ties with Saudi Arabia have seen the signing of an intergovernmental agreement for renewable energy investments worth approximately $2 billion, reached earlier this year.
The combined and relatively young and dynamic population of Türkiye, Pakistan and Saudi Arabia, which stands at about 380 million, also carries potential for closer inter-people relations and cooperation.
-
Politics3 days agoSister accused of aiding FETÖ assassin nabbed in Türkiye
-
Economy1 day agoTürkiye sets 2026 daily truck departures record at gate with Iraq
-
Economy3 days agoWhy Ukraine is targeting Wildberries – and why it matters
-
Politics1 day agoSomalia welcomes Saudi-Türkiye-Pakistan defense pact
-
Politics3 days agoTürkiye captures 104 Daesh suspects in nationwide operations
-
Politics3 days agoReturns anticipated as terror-free Türkiye law advances
-
Economy3 days agoTrump mounts new bid to oust Fed Governor Lisa Cook
-
Economy1 day agoChina inflation eases in July, producer prices at 3-month low