What will happen without a price advantage? Temu is in serious trouble in the shadow of the tariff war

By: Trademagazin Date: 2025. 05. 27. 11:26

The profit of Temu, one of the fastest growing players in the e-commerce sector, operated by China’s Pinduoduo (PDD), has fallen by half. Although the company continues to generate significant turnover – $13.28 billion in the first quarter – this fell far short of analysts’ expectations. Instead of the $14.23 billion turnover estimated by LSEG, there is a nearly one billion hole in the company’s financial report – writes VG.hu.

Tariff war, strictness, crisis of confidence

The management attributes the reasons for Temu’s decline to three main factors: the declining willingness of the Chinese population to buy, the threat of an international tariff war, and the tightening of market regulations. The investor reaction was immediate: after the publication of the quick report, the price of PDD shares fell by 21% on the Nasdaq.

Domestic consumption in China remains subdued, which Temu’s aggressive price cuts have not been able to compensate for. According to Lei Chen, PDD’s chairman and co-CEO, this is partly a result of the company’s conscious strategy: in recent times, resources have been invested in developing its dealer network in order to build stable and sustainable partnerships in the long term. Although this has hurt profitability in the short term, management is confident that the investment will pay off in the long term.

The US market: both an opportunity and a risk

On the international front, the greatest uncertainty is the development of US-China trade relations. After the 90-day ceasefire in the tariff war that will last until mid-July, a dramatic turn of events could occur, which could lead to a significant price increase for Temu. Currently, Chinese merchants can send packages under $800 duty-free to the United States under the “de minimis” rule – this gives them a huge competitive advantage in terms of price.

However, the US government, under pressure from Donald Trump and his supporters, is considering removing Chinese shipments from the de minimis category. If this happens, the new tariffs will certainly lead to price increases and would significantly weaken Temu’s position in the US market, which is key to the company’s international growth.