IPO tariff troubles

Good morning,

A truck unloaded 90,000 rubber ducks into the Chicago River for a fundraiser. Rubber duck commodity markets may take a hit after the biggest duck liquidity event ever recorded.

In today’s edition:

• The tariff bill hits fast fashion, but not the fashion machine
• AI’s impact on entry-level hiring, explained by Ramp’s economist

Tariffs unravel Shein’s $100B IPO prospects, but its secret strength is the fashion machine

Shein became the biggest fast-fashion brand in the U.S. thanks to its endless online inventory of low-priced styles. We’re talking thousands of new items listed daily, from $3 graphic tees to $7 sneakers. After explosive growth during the pandemic shopping boom, Shein was valued at $100B in 2022 (more than H&M and Zara combined at the time). Now:

• Shein is aiming for a $30B to $40B valuation in its expected Hong Kong IPO this month, Reuters reports. Meanwhile, Bloomberg Intelligence said Shein’s niche supports a valuation of only $22B to $25B, suggesting it may fall short of its target.
• Losing American steam: Shein’s U.S. revenue dropped from nearly $10.5B in 2024 to $10.1B in 2025. U.S. sales also fell in the first quarter of this year.

Why the lost sheen? It’s not just a mounting list of controversies, from forced labor concerns to design plagiarism lawsuits, that have marred the appeal. Tariffs are threatening Shein’s low-cost value proposition (most of its clothes are made in China).

• Shein saw its costs soar after the “de minimis” loophole (which exempted shipments under $800 from U.S. tariffs) was scrapped last year.
• The company said that in May 2025, it began passing on “the majority of the additional tariff costs” to consumers by hiking prices in the U.S. Despite the price hikes, it swung to a $99M loss in Q1 from a $395M profit a year earlier.
• “The removal of the U.S. de minimis exemption has had an adverse impact on our sales in the U.S. and the overall growth of our net revenues,” Shein wrote in its filing. Shein forecast that it could see a similar hit in Europe, which last month got rid of its own de minimis exemption for low-value shipments.

An overlooked part of Shein shines: Shein offers something akin to fast-fashion-as-a-service, where designers and brands pay for access to its supply chain, production, sales platform, and fulfillment services. As of Q1, services made up less than 1.5% of Shein’s revenue, but their share of the total has been rising fast.

• While product revenue grew just 19% from 2023 to 2025, services revenue was up nearly 450% over the same period.
• Shein said that operating margin from its brand enablement services is about twice as high as its group operating margin.

The bottom line:

The rails can be more valuable than the cargo… Especially in an industry with threadbare margins like fast-fashion. Shein’s clothes are getting harder to sell profitably, but the infrastructure behind them could become the more valuable business. Services are also less directly exposed to tariffs. In a few years, Shein may look less like a fast-fashion retailer and more like the machine powering one.

What if AI isn’t killing entry-level hiring?

Many suspect that AI is hurting hiring — especially for entry-level roles.

New research from Ramp and Revelio Labs found something surprising: at companies making the largest AI investments, headcount grew 10% over the two years following adoption. Entry-level hiring grew even faster.

How can that be? Ramp’s lead economist Ara Kharazian dives into the data and what it means for the future of jobs.

Signals Shortlist

• Nvidia and Wall Street partner on $500B AI financing (Axios)
• Oil in U.S. Strategic Petroleum Reserve hits lowest level since 1983 (CNBC)
• More young adults are moving back in with parents (The New York Times)
• U.S. unexpectedly lost 23K jobs in July, rate hike bets drop (ABC)
• American will stop upgrading elite flyers on long domestic flights (CNBC)
• Contiguous U.S. breaks its record for hottest month ever (AP)
• Senate advances landmark crypto regulation bill (Reuters)

🗓️ Leading Events:

Tuesday, August 11: NFIB Small Business Optimism Index. Earnings expected from CoreWeave, Supermicro, and CAVA

Wednesday, August 12: Consumer Price Index. Earnings expected from Cisco, Tencent, and Nebius Group

Thursday, August 13: Producer Price Index. Earnings expected from Applied Materials, JD.com, and Tapestry

Friday, August 14: Retail sales. Michigan consumer sentiment (preliminary)