Amazon's Chinese Rival Temu Loses 58% Of US Users As End Of Tariff Loophole Hits Business Model
PDD Holdings' Temu platform has seen a 58% drop in daily U.S. users due to the end of the tariff loophole that previously allowed Chinese e-commerce to ship goods tariff-free. This policy change has disrupted Temu's business model, leading to a 10% revenue growth in Q1, missing analyst expectations. The company is now adjusting its strategy by reducing U.S. advertising and focusing on U.S.-based product fulfillment. PDD's stock has shown a slight increase in pre-market trading but remains down year-to-date.
PDD Holdings Inc. PDD faces mounting challenges as its Temu platform struggles with significant user losses following major U.S. trade policy shifts that eliminated key cost advantages for Chinese e-commerce platforms.
What Happened: Daily U.S. users of Temu fell 58% in May, according to market intelligence firm Sensor Tower, reported Reuters. The decline followed the White House’s May 2 decision to end the “de minimis” provision, which previously allowed Chinese companies to ship packages valued under $800 to the U.S. tariff-free.
Temu responded by slashing U.S. advertising spending and shifting its fulfillment strategy. The platform now displays only products shipped from U.S.-based warehouses, with China-shipped items labeled “out of stock.”
Previously, Temu operated by giving merchants responsibility for ordering and supplying products while managing logistics, pricing and marketing from China.
PDD’s first-quarter earnings reflected these pressures. Revenue grew just 10% year-over-year to $13.18 billion, missing analyst estimates of $14.17 billion. Adjusted operating profit declined 36% to $2.52 billion, with margins falling from 32.9% to 19.1%.
Why It Matters: The tariff changes fundamentally disrupted Temu’s business model, which relied on direct shipments from Chinese suppliers to maintain ultra-low prices.
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The new regime imposes 90% duties or $75 per item on Chinese imports, scheduled to increase to $150 per item by June. While competitor Shein has managed to increase per-customer spending despite similar challenges, Temu has struggled to adapt.
Price Action: PDD stock closed at $96.44 on Monday, down 0.07%. In pre-market trading on Tuesday, the stock rose 0.62% to $97.04. Year to date, PDD shares are down 0.46%.
PDD's Temu platform competes with Amazon.com Inc. AMZN. According to Benzinga Edge Stock Rankings, PDD has a stronger valuation than Amazon but lacks momentum. The stock also shows a negative price trend across short to long term. Click here to see the full stock breakdown.
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