Temu’s low-cost shipping model is under siege as tariffs force a high-stakes logistics pivot—from Chinese airfreight to American warehouses.
U.S. kills the de minimis loophole, and Temu’s whole business model gets punched in the face.
The short version: Tariffs just body-slammed Temu
PDD Holdings—the Chinese owner of Temu—just reported a 47% profit drop and its slowest revenue growth since 2022. The main culprit? Tariffs.
After the Trump administration axed the de minimis loophole—which allowed sub-$800 packages from China to land in the U.S. duty-free—Temu’s low-cost, air-freight business model took a direct hit. Reuters and NY Post confirm: tariffs shot up to 120%, later eased to 54% for 90 days. But the damage is done.
Shares dropped 13.9%. Profits halved. Price hikes kicked in. U.S. sales dipped. And that $2 Temu deal? It’s probably now $3.50.
Why it matters: The “cheap and fast from China” model is cracking
Temu and rivals like Shein built dominance on a logistics cheat code: low-value airfreight shipped direct from China with no duties.
That’s over. With de minimis dead, they’ve had to:
- Shift to U.S. warehousing
- Increase prices sitewide
- Stop shipping many products direct from China
- Reroute supply chains and eat short-term losses to stay afloat
PDD’s co-CEO Lei Chen didn’t sugarcoat it. On the earnings call, he said tariffs and merchant struggles are “significant pressures” on the platform. They even expanded fee-reduction programs just to keep sellers alive.
“This weighed on short-term profitability but gave merchants the room to adapt,” he added.
Translation: We’re bleeding now to not die later.
The operator POV: This is a warehouse war now
Temu’s not done. They’re not folding. They’re pivoting—fast.
Here’s what smart brands should be watching for:
🟧 Surge in U.S. warehousing: Temu and Shein are jamming product into 3PLs while the 90-day reprieve is active. Expect flooded inventory through July.
📦 Hybrid fulfillment plays: Some goods from China, some from local stock. Think: Temu morphing into Amazon—minus the customer trust.
📉 Price war 2.0 incoming: They’ll push U.S.-based items hard come Q4. Lower margins, same aggressive tactics.
💸 CAC shock in Europe: As the U.S. clamps down, China’s giants are dumping ad dollars into the EU. French regulators are already on edge. Expect tighter rules and louder retailers.
So what?
This isn’t “Temu loses.” It’s Temu mutates.
They’re shifting from airfreight pirates to warehousing warlords. And while tariffs hurt, they’re not fatal—not yet.
📉 But for U.S. brands? There’s no reprieve.
You’re stuck with bloated supply chains, higher input costs, and zero policy breaks. Your only edge is customer experience and brand loyalty—if that still matters in the age of $3 sunglasses and 24-hour TikTok dopamine.
Protectionism feels good until your customer clicks “Add to Cart” on a slightly more expensive Temu product… and skips yours entirely.
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