What's happened
Temu has shifted its order fulfillment strategy and reduced ad spending in the US following the end of the 'de minimis' exemption, which allowed low-value packages from China to enter the US tariff-free. This change, coupled with rising tariffs, has led to a significant decline in Temu's sales growth and user engagement.
What's behind the headline?
Impact of Tariff Changes on Temu
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Sales Decline: Temu has experienced a sharp drop in sales growth and user engagement since the end of the 'de minimis' exemption. Analysts note that the company's competitive threat is weakening as it struggles to adapt to the new tariff environment.
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Shift in Strategy: In response to these challenges, Temu is transitioning to a local fulfillment model, allowing US-based sellers to manage inventory and shipping. This shift aims to mitigate the impact of tariffs but may lead to increased prices for consumers.
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Market Position: While Temu's non-US markets are seeing growth, the company faces significant hurdles in the US, where it has lost market share to competitors like Shein, which has managed to increase customer spending despite the same tariff pressures.
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Long-term Outlook: Analysts suggest that if the current tariff situation persists, Temu's ability to compete effectively in the US market will continue to diminish, potentially leading to further declines in user engagement and sales.
What the papers say
According to the NY Post, Temu's engagement has dropped significantly following the end of the exemption, with Morgan Stanley analyst Simeon Gutman stating, "if the status quo remains for an extended period, we believe Temu’s competitive threat will continue to weaken." Meanwhile, Bloomberg highlights that the S&P 500's resilience is largely due to strong performance in the technology sector, which may not directly relate to Temu but indicates broader market dynamics at play. The South China Morning Post reports that PDD Holdings, Temu's parent company, is facing a 47% profit decline, attributing this to intensified competition and tariff impacts. This sentiment is echoed in Business Insider, where CEO Lei Chen noted that the external policy environment, including tariffs, has created significant pressure for merchants. Overall, the sources illustrate a challenging landscape for Temu as it navigates these economic shifts.
How we got here
The 'de minimis' exemption was terminated by the US government on May 2, 2025, impacting companies like Temu and Shein that relied on it to keep prices low. The introduction of higher tariffs has forced these companies to adjust their business models to maintain competitiveness.
Go deeper
- How are other companies like Shein responding to tariffs?
- What does the local fulfillment model mean for consumers?
- Are there any predictions for Temu's future in the US market?
Common question
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How Are Recent Tariff Changes Affecting Temu's Business?
Recent tariff changes have significantly impacted Temu, a popular e-commerce platform. As tariffs on imports rise, Temu's ability to maintain its low-price model is being challenged, leading to questions about the future of the company and the broader e-commerce landscape. Here are some common questions and answers regarding these developments.
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As inflation and tariffs continue to impact consumer spending, retailers are evolving their strategies to meet the needs of budget-conscious shoppers. This page explores the latest trends in retail, highlighting which sectors are thriving and how businesses are adapting to the current economic landscape.
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How Will US Tariff Changes Impact Global Trade?
The recent announcement of tariff increases by the US government has raised numerous questions about its implications for global trade. As countries and companies scramble to adapt, understanding the effects of these changes is crucial. Below, we explore key questions surrounding the impact of US tariff changes on international trade dynamics.
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How Are Recent Tariff Changes Affecting E-commerce Companies Like Temu?
Recent tariff changes, particularly the end of the 'de minimis' exemption, have significantly impacted e-commerce companies, especially those relying on low-value imports. This shift raises questions about how businesses are adapting and what it means for consumers. Below, we explore the implications of these changes and the strategies companies are employing to navigate this challenging landscape.
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