US President Donald Trump’s announcement of new tariffs on Canada, Mexico, and China has sent shares of Temu parent PDD Holdings plummeting 5.9%. The tariffs signal the end of a trade loophole that allowed packages under $800 to enter the US duty-free. This exemption was crucial for online retailers like Temu and Shein, which rely on it to maintain their rock-bottom prices.
The “de minimis” trade exemption has been criticized by lawmakers for giving Chinese companies an unfair advantage. Officials have also raised concerns over product safety due to minimal documentation and inspection required for these shipments. The tariffs will likely curb the ability of these e-commerce giants to keep prices low, potentially impacting their explosive US growth in recent years.
Analysts warn that Temu’s local warehouse program may not be enough to mitigate the tariff risks, estimating it could contribute only 20% to US gross merchandise volume by 2024. The end of de minimis may also dampen digital ad spending for these companies, which rely on advertising revenue from their Chinese user base to offset rising product costs.
This development marks a significant blow to Temu and Shein’s business models, which have been heavily reliant on the trade exemption. The companies’ ability to sustain growth in 2025 and beyond is now uncertain, as they face increased tariffs and potential impacts on digital advertising revenue.
Source: https://www.cnbc.com/2025/02/03/temu-parent-pdds-stock-tumbles-as-trump-tariffs-close-trade-loophole.html