Tariffs have U.S. shoppers tightening their purse strings. Marquee brands like Macy’s, Gap, e.l.f. Cosmetics, and Best Buy have already warned their customers of potential and upcoming price hikes. And now, global e-commerce platforms like Temu and Shein are also facing the repercussions of President Donald Trump’s imposed tariffs.
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The parent company of Temu, PDD Holdings, saw a whopping 48 percent drop in daily U.S. users in May compared to March, before "Liberation Day" on April 2, when Trump instigated a trade war against China. Reuters was the first outlet to report the news, citing stats from the market intelligence firm Sensor Tower.
Data from the consultancy firm Bain & Company shows a "sharp drop in sales growth and customer growth rates" for both Temu and its rival Shein, as reported by The New York Post.
The U.S. currently has a 10 percent baseline tariff on all imported goods. But let’s do a quick refresher: Under Trump’s executive orders, there is a 25 percent tariff on Canadian and Mexican goods, and items coming from India have a tariff of up to 27 percent. There are also talks that Trump will impose a 46 percent tariff on imports from Vietnam come this July, per Reuters.
However, it’s the tariffs on Chinese imports that are wreaking havoc on Temu’s sales growth—or lack thereof. As of this writing, Chinese tariffs stand at 145 percent, which is the highest of any country. Though, Trump is reportedly in the process of negotiating a deal with China that would reduce tariffs down to 30 percent, according to The New York Times.
PDD Holdings held its first-quarter earnings call on May 27, during which the company disclosed a significant year-over-year decline (38 percent) in Temu's profits due to tariffs, among other related variables. Through Temu, PYMNTS obtained comments from Chairman and Co-CEO Lei Chen about the situation.
"No matter how policies shift, we’ll continue to strengthen our operations in the markets we serve, helping more local merchants grow on our platform and enabling more orders to be fulfilled from local warehouses," Chen commented, as shared by Temu. "Right now, we are seeing these merchants becoming more proactive, with better-stocked inventory and more value passed on to consumers through differentiated products and services."
Chen added that PDD Holdings is committed to working with sellers to offer "stable prices and abundant supply" to shoppers.
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However, the de minimis tax exemption is one of the biggest obstacles standing in their way. The tax break allows items worth $800 or less to come into the U.S. duty-free, explained The Washington Post. America terminated de minimis for Chinese and Hong Kong goods on May 2. By default, Shein has also been impacted.
Temu has made behind-the-scenes changes in efforts to fight back. According to PYMNTS, more than one-third of American purchases are now "fulfilled with inventory maintained in the U.S." Temu has also notably raised its prices, while also reducing its U.S. paid advertising.
But even still, tariffs have "created significant pressure for our merchants, who often lack the capability to adapt quickly and effectively," said Chen.
Only time will tell if Temu and Shein are able to regain their footing—of course, the potential 115 percent reduction in Chinese tariffs will also cushion their efforts.
