Temu’s Parent Company Faces Profit Plunge Amid US Tariff Escalation

28 May 2025

Jonathan Raa—NurPhoto/Getty Images

PDD Holdings, the Chinese conglomerate behind the popular online shopping platform Temu, has reported a significant downturn in its financial performance, citing intensified trade tensions and domestic market challenges as primary factors.

In its latest financial disclosure, PDD Holdings revealed a nearly 50% decline in profits for the first quarter of the year, amounting to 14.74 billion yuan ($2.05 billion). This sharp decrease has been attributed to recent policy shifts by the Trump administration, notably the termination of the "de minimis" exemption. This exemption previously allowed parcels valued under $800 to enter the U.S. without incurring import duties, a policy that significantly benefited e-commerce platforms like Temu and its competitor Shein. The revocation of this exemption has led to the imposition of steep tariffs, reportedly as high as 120%, on low-value goods imported from China.

In response to these heightened tariffs, Temu announced a suspension of direct sales from China to U.S. consumers. However, a subsequent easing of trade tensions between Washington and Beijing resulted in a temporary reduction of these tariffs by over 50% for a 90-day period.

Domestically, PDD Holdings is grappling with a protracted price war against rivals such as Alibaba and JD.com, set against a backdrop of weakened consumer spending in China. Chairman Chen Lei highlighted the "radical change in external policy environments such as tariffs" as a significant pressure point for the company's merchants.

Beyond the U.S., Temu and other Chinese e-commerce entities are encountering regulatory challenges in Europe and the United Kingdom. The European Union has proposed a flat fee of two euros on billions of small parcels delivered directly to consumers' homes, a move that would impact online marketplaces financially. In the UK, Chancellor Rachel Reeves announced a review of customs treatments for low-value imports, following concerns raised by domestic retailers about unfair competition.

The convergence of international trade barriers and domestic market saturation presents a complex landscape for PDD Holdings. As the company navigates these multifaceted challenges, its strategies and adaptability will be critical in maintaining its position in the global e-commerce sector.