Amazon's Chinese Rival Temu Loses 58% Of US Users As End Of Tariff Loophole Hits Business Model

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.