Forever 21 to Close All U.S. Stores, Tariff Loophole Blamed for Collapse

Forever 21, once a staple of American malls and teen closets, is closing all 350 of its U.S. stores after filing for bankruptcy—for the second time in six years. The fast fashion chain, which once boasted more than $4 billion in annual sales, has been outpaced by a new breed of retail competitors. Many blame a little-known trade policy called the “de minimis” tariff exemption for accelerating its downfall.

The company’s decision to liquidate marks the end of an era for mall shoppers who once flocked to Forever 21 for trendy clothing at low prices. But in recent years, those same shoppers have turned to cheaper online retailers like Shein and Temu, which have dominated the fast fashion market by sidestepping many of the costs traditional retailers face.

According to NBC News, Forever 21 peaked around 2015 before a sharp decline in the following years. Its dependence on physical retail stores left it vulnerable as inflation soared and shopping habits moved online. But a key disadvantage stemmed from how international shipping rules favor newer players in the industry.

Under the U.S. de minimis rule, packages worth less than $800 sent directly to consumers from overseas are exempt from import taxes. Shein and Temu, which ship single orders directly from factories in Asia, can offer items like a chiffon blouse for as little as $5 during sales. Meanwhile, Forever 21’s supply chain model—buying in bulk, importing in containers, and distributing to stores—means it must pay the full import duties. This often pushed their prices to $15 or $20 for similar items.

Retail experts say the price gap created by the tariff exemption made it nearly impossible for brands like Forever 21 to compete. While Shein and Temu kept undercutting prices and flooding social media with targeted ads, traditional retailers were stuck with higher costs and slower supply chains.

The situation drew enough attention that the Trump administration attempted to eliminate the de minimis exemption in early 2025. However, the move triggered a massive backlog—over a million packages piled up at JFK Airport alone. With not enough customs agents to inspect the new flow of taxable shipments, officials put the change on pause.

According to U.S. Customs and Border Protection data, more than 1.36 billion shipments entered the country under the de minimis rule in 2024. Ten years earlier, that number was only 140 million. Now, about 70 percent of all textile and apparel imports to the U.S. come in through this exemption. The rule, originally meant to simplify low-value imports, has effectively reshaped how Americans shop.

Retail analysts say the growth of de minimis shipping has especially transformed the fast fashion industry, where consumers chase low prices and fast delivery. Companies that rely on the traditional model—like Forever 21—have struggled to keep up.

“Forever 21 just couldn’t compete with the new rules of the game,” said Alex Sher, a retail economist with the International Council of Shopping Centers. “When your competitors are getting their goods in without paying tariffs and you’re still paying full freight, your prices are always going to be higher.”

As Forever 21 prepares to shutter its final locations, some see its fall as a warning sign for other American retailers still trying to survive in an online-first, price-driven world.