Temu’s U.S. customer base plunged by over half in May following a key tariff loophole’s closure, forcing the Chinese e-retail giant to overhaul its strategy.
At a Glance
- Temu’s daily U.S. users dropped 58% in May after “de minimis” tariff exemption ended
- The company is shifting to a domestic fulfillment model requiring merchants to manage import duties
- Rival Shein retained users and grew spending despite similar trade pressures
- Temu is cutting U.S. ad spend and expanding into lower-income international markets
- 90% of Temu’s global users now reside outside the United States
The Fall of Temu’s U.S. Market Share
Temu, the budget shopping app owned by China’s PDD Holdings, has suffered a dramatic 58% decline in daily U.S. users, according to Sensor Tower data. The plunge follows the termination of the “de minimis” rule, a loophole that had exempted imports under $800 from tariffs—an essential mechanism Temu used to keep U.S. prices low.
This regulatory change has forced Temu to hike prices on goods that were once ultra-affordable. Analysts believe this has alienated its core user base of price-sensitive American consumers and led to reduced app engagement. The impact has been immediate and severe, with Livemint reporting that PDD Holdings’ earnings have also come under pressure due to weakening U.S. growth.
Diverging Fortunes: Temu vs. Shein
Although both Temu and Shein relied heavily on the de minimis exemption, Shein appears to have weathered the regulatory shift more effectively. The fashion platform has managed to boost customer spending even as tariffs increased, suggesting higher brand loyalty and a stronger customer relationship.
In contrast, Temu’s emphasis on flash sales and deep discounts left it more exposed. “If the status quo remains for an extended period, we believe Temu’s competitive threat will continue to weaken,” said JPMorgan analyst Simeon Gutman, echoing a growing consensus among retail experts.
Strategic Pivot: Domestic Fulfillment and Global Expansion
To counter its U.S. downturn, Temu is radically altering its supply chain strategy. Rather than drop-shipping goods directly from China, it’s now requiring sellers to route products through domestic warehouses, taking on customs and tariff costs upfront. This allows Temu to fulfill orders locally, albeit with narrower profit margins and a more complex logistics model.
Watch a report: Temu’s User Base Halves After Tariff Loophole Ends.
At the same time, Temu is scaling back its splashy U.S. ad campaigns—including the high-profile Super Bowl spots—and redirecting resources toward international growth. Today, 90% of Temu’s global monthly users are based outside the U.S., with the app gaining popularity in less affluent markets where price remains king. The company hopes this broader global play will offset its retreat from the American market.
The next few quarters will test Temu’s resilience. With Shein gaining ground and U.S.-China trade tensions intensifying, the road ahead is uncertain. For PDD Holdings, Temu’s international experiment may determine whether its global aspirations remain viable—or unravel under regulatory heat.
