The TikTok, Shein, and Temu Conundrum

Navigating the Clash Between Legal Strategy and Public Perception

The tension between U.S. regulators and China-affiliated companies is reaching new heights, especially for TikTok, Shein, and Temu, as concerns about data privacy, national security, and economic competitiveness converge. These companies are now grappling with increasingly complex regulatory landscapes, caught in a tug-of-war between growth and survival.

Simply put: it’s showdown time.

Credit: Associated Press; Copyright: Aaron Schwartz/NurPhoto

In a recent Wired article, I weighed in on TikTok’s defense strategy during its recent court hearing. The piece, aptly headlined “TikTok’s Defense Strategy Involves Throwing Shein and Temu Under the Bus,” captures the heart of TikTok’s legal gambit—deflecting scrutiny by pointing out that other Chinese apps, like Shein and Temu, collect far more personal data than TikTok. TikTok's legal counsel focused on the Protecting Americans from Foreign Adversary Controlled Applications Act (PAFACA), arguing that the “law exempts other Chinese apps that could be doing worse in terms of data security protection.”

“There are very significant e-commerce sites based in China and other places that collect much more data than TikTok does—very sensitive data,” TikTok’s lawyer said. He even narrowed the targets to “two Chinese e-commerce sites that would certainly meet all of the other criteria in the law.”

However, this tactic could backfire. By aligning itself with Shein and Temu, TikTok risks undermining its long-held stance of being a global, rather than a Chinese, company. As I noted in the piece,

"TikTok, in its defense, may be weakening its narrative that it’s not a Chinese company by grouping itself with Shein and Temu."

This might make for a sound legal strategy, but from a reputation management perspective, it complicates TikTok's positioning in Western markets. By focusing on its competitors’ practices, TikTok inadvertently ties itself to them, reinforcing the perception that it belongs in the same category of Chinese-origin companies.

With The Wall Street Journal, I got to explore how Shein and Temu are navigating the proposed de minimis tariff ban. This exemption, which has allowed these companies to send low-cost goods to the U.S. with minimal import duties, has been central to their explosive growth in the U.S. market. In the WSJ piece titled "How a Tariff Rule Aimed at China Could Affect U.S. Ad Spending,"

I pointed out that “Shein and Temu are downplaying the political risk by either minimizing the importance of this loophole or focusing on how it levels the playing field for all players.”

This narrative, while providing temporary cover, won’t hold for long—the game of musical chairs is coming to an end. Both companies have built their business models on cost and operational efficiency, but they must now face the reality that the regulatory landscape is shifting beneath them. By focusing on efficiency and exploiting every loophole available, Shein and Temu have achieved unprecedented success, but the existential danger they face in the U.S. is something they can no longer afford to ignore.

Legal Strategy vs. Reputation Management

TikTok’s courtroom defense and Shein and Temu’s response to tariff scrutiny highlight the delicate balancing act China-affiliated companies must perform. Their legal strategy is in direct conflict with their long-term reputation. TikTok’s decision to deflect attention toward Shein and Temu may help in court, but it risks blurring the line between TikTok’s narrative of being a global company and its association with other Chinese-origin platforms. The more TikTok invokes Shein and Temu in its defense, the more it undermines its efforts to distance itself from the "Chinese company" label.

Similarly, Shein and Temu are walking a fine line. Their efficiency-driven business models, while highly successful, are being questioned by both regulators and the media. The de minimis tariff exemption has been crucial to their growth—despite the PR efforts to minimize its importance—allowing them to undercut competitors on price and rapidly expand in the U.S. However, this loophole is closing in fast.

As WSJ also reported, Shein has been on a charm offensive, “spending on lobbying and allocating more than $50 million to ensure it and its thousands of suppliers comply with regulations where Shein operates.” Yet in the context of Shein’s purported $32 billion in sales in 2023, that’s a mere 0.15%—so much for talking a big game.

Legal and reputation strategies are often at odds because they serve different audiences and objectives. As seen with TikTok’s U.S. court defense, legal arguments that shift blame onto competitors may work in court but can backfire in the court of public opinion. By aligning itself with Shein and Temu, TikTok weakens its long-standing narrative of being a global, non-Chinese company, complicating how it’s perceived by Western audiences. Moreover, legal strategies that focus on minimizing blame or shifting responsibility often clash with public expectations for accountability, potentially eroding trust.

There’s also the risk that legal talking points can be used by critics in the public realm, further damaging a company’s reputation. TikTok’s defense, designed to win in court, could be framed by opponents as evasive or even dishonest, undermining the company’s credibility outside the courtroom. While legal strategies aim for short-term victories, reputation requires long-term, consistent, values-based communication. In TikTok’s case, winning in court may come at the expense of eroding trust with its global audience.

Dual Narratives and the Global Scrutiny of Chinese Companies

These examples underscore two central challenges for China-affiliated companies operating in the West. First, their legal strategies often clash with long-term reputation goals. Second, they must balance the demands of U.S. regulatory frameworks with the expectations of their domestic Chinese audiences.

These companies must juggle dual narratives—one for Western regulators and consumers, and another for their domestic Chinese audience. In China, these companies are celebrated for their efficiency and competitiveness in overseas markets, partly due to the favorable (often pay-for-play) media landscape. However, in the U.S., they are increasingly viewed with suspicion, seen as potential threats to national security and economic stability. Navigating these conflicting narratives is no easy task, especially as regulatory pressure mounts.

The U.S. media is also starting to consider the broader implications of these companies' operations. Beyond immediate concerns about data privacy and regulatory compliance, questions are being raised about their broader impact on the U.S. economy, competition, and global commerce. More importantly, the companies’ rise could reshape the competitive landscape from impact on retail and supply chain security, to effects on tech innovation and the advertising industry.

The Road Ahead: Reputation and Stakeholder Engagement

As China-affiliated companies face growing regulatory and public scrutiny in the U.S., the need for thoughtful reputation management and stakeholder engagement has never been more critical. Legal victories alone will not secure their future in Western markets; they must also win over public opinion and navigate a complex web of narratives that transcend national boundaries.

For TikTok, Shein, and Temu, the road ahead will be defined by their ability to reconcile their global ambitions with the regulatory realities they face in the U.S. and beyond. How they manage this balancing act could very well determine their future—not just in the U.S. market, but in the global economy.

And we’ve arrived at the perfect spot to plug Wavelet Strategy, a thought leadership and reputation management firm—https://waveletnyc.com

Ivy@waveletnyc.com