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A rising competitor to Amazon (AMZN-1.08%) may find itself kneecapped by the trade war between China and the United States.
Temu has gained popularity with its whimsical items, fast fashion and, perhaps most importantly, low prices. But those modest price tags are in jeopardy with tariffs on Chinese imports now in jeopardy.
Temu’s goods are subject to hefty tariffs and the closure of the de minimis loophole, which allowed shipments under $800 to come into the country without being levied. The de minimis exemption is scheduled to end in early May.
Martin Balaam, CEO of e-commerce software company Pimberly, says that the current tariff battle between the U.S. and China puts increasing pressure on Temu’s margins — especially given their low-cost, high-volume model.
“Increased import costs could force them to either raise prices — eroding their competitive edge — or absorb the costs, which isn’t a sustainable long-term solution,” Balaam says.
The other alternative is to start building more infrastructure in the U.S., but that has its own complications.
“At the end of the day it’s not that easy — political and strategic resistance from China could limit how far they’re allowed to go,” says Balaam. “At the moment, Temu is caught in a tricky balancing act between geopolitical realities, as well as their respective growth ambitions in the U.S. market.”
Sudip Mazumder, retail industry lead for North America at consulting firm Publicis Sapient (PUBGY+0.02%), says that the increased tariffs and the end of the de minimis exemption pose a significant threat to Temu’s current business model in the U.S.
“Their ability to compete and operate effectively will depend on how swiftly and strategically they can adapt,” Mazmuder says. “Building a significant manufacturing base in the U.S. seems like a longer-term and potentially less desirable option for them due to cost implications and potential pushback from China.” Mazmuder adds that a more likely near-term strategy involves a combination of absorbing some costs, selectively raising prices, aggressively diversifying their supply chain outside of China, and gradually building some U.S.-based warehousing and fulfillment capabilities.
To mitigate costs, Temu will likely reroute products through countries offering favorable tariff conditions such as Mexico, Brazil, and countries in South Asia, before reaching the final U.S. destination says Mariano Gomide de Faria, co-CEO of digital commerce platform VTEX (VTEX+0.51%).
“Temu has been reducing reliance on shipping individual low-value items directly from China, increasingly shifting operations towards U.S.-based fulfillment centers, similar to Amazon’s logistics strategy,” de Faria says. The company has shifted its strategy in recent months, he notes, as Temu now actively discourages consumers from purchasing single, low-priced items directly from China — meaning the company relies less on the de minimus provision.
Research from marketing firm Omnisend, though, shows that Tamu’s foothold in the U.S. may have already begun a decline even before the trade war. According to a nationally representative survey of 1,000 U.S. consumers, Temu’s monthly shoppers declined 17.5% year-over-year, falling from 34.8% in 2024 to 28.7% in 2025. Weekly shoppers fell 19%, and trust in Temu compared to Amazon dropped by 38%.
Greg Zakowicz, senior e-commerce expert at Omnisend, says that the timing of the trade war couldn’t be worse for Temu.
“Temu’s rock-bottom pricing model is under serious pressure,” Zakowicz says, noting that Temu’s traffic decline is likely a combination of consumer fatigue and consolidated spending.
“For the past 12 to 18 months, consumers have been consolidating their purchases more with value-based stores like Walmart (WMT+2.60%) and Amazon,” he says. “This means shoppers are placing fewer one-off purchases at stores like Temu, opting instead for the convenience of placing larger orders with one retailer.” During the Black Friday to Cyber Monday shopping season, Omnisend found that customers placed fewer orders but had a 55% increase in average order value compared to 2023.
Also of concern: The report found that 20.8% of consumers say they’ll stop shopping through Temu if prices increase by 20% or more.
Overall, Temu’s novelty has worn off a bit for U.S. shoppers, Zakowicz says.
“Gamification and long shipping times can only hold consumers’ interests for so long, and as TikTok Shop and value-based shopping took hold, Temu has faced a natural drop that comes along with it,” he says.