As the China-American tariff war drags on, bargain-shopping app Temu reports nearly a 50% drop in profits and its slowest revenue growth in three years.
On Tuesday, the company’s US-listed shares fell by more than 13% after it disclosed that its net profit had plunged to 14.74 billion yuan, approximately $2.46 billion in the year’s first quarter. Although quarterly revenue was up 10% from the same period last year, the results missed analysts’ forecasts and represented the weakest growth since Q1 2022.
The Trump administration called for the end to the duty-free exemption on low-value parcels.
Shopping platform Temu had seen a 131% revenue growth at the start of 2024 and a 24% rise in Q4 of the year. However, for Q1 2025, Temu only recorded 95.67 billion yuan, roughly equivalent to $13.31 billion, falling short of 104.41 billion yuan, about $14 billion, market expectations. Its net profit for the quarter also dwindled by 47%.
Thus, PDD Holdings may have to rethink its ambitious plan to expand Temu, seeing the lower quarterly earnings and a new wave of budget-conscious consumers in the US.
PDD had to raise prices on the Temu platform in April after the China-US trade war escalated. Then, in early May, the US government halted the duty exemption for Chinese goods valued under $800, impacting PDD’s US business.
Temu and its competitor, Shein, heavily depended on the duty-free environment, enabling them to transport and sell low-value packages to the US. However, with the Trump administration removing the exemption, their goods have faced tariffs as high as 120%.
The US government insisted that the change was necessary to limit the illegal shipments of synthetic opioids like fentanyl. It argued that most Chinese shippers use low-value packages to sneak in illegal substances under the “de minimis” exemption.
The administration even claimed that over 75,000 Americans lose their lives each year to fentanyl alone. On Tuesday, PDD Holdings’ co-chief executive Lei Chen revealed that they had invested in supporting merchants and consumers while progressively working to respond to external alterations. Chen also affirmed that the US-China tariff war burdened its merchants.
The EU proposed extra fees for small parcels entering the region
Temu claimed it would halt the direct sale of goods entering the US from China. The online platform stated that its sales would now be managed by locally based sellers, attending to orders from within the country. It also disclosed that it’s planning for more collaborations with US companies to aid local merchants in expanding their consumer base and growing their businesses.
Temu could see relief in the next few weeks as both countries agreed to reduce the tariff on small parcels to 50% for 90 days.
Meanwhile, Temu could start seeing trouble with its European markets. The European Union suggested a two-euro flat fee on small parcels.
According to EU Trade Commissioner Maros Sefcovic, the tax would apply to packages worth less than 150 euros, of which online marketplaces would be expected to pay.
In 2024, nearly 5 billion small packages entered the EU, with over 90% from China.
Additionally, in April, UK Chancellor Rachel Reeves claimed they were considering changes to their customs treatment for small parcels entering the country, which could cause more harm to online marketplace businesses.
