The Chinese e-commerce giant behind bargain shopping app Temu is facing turbulent times as trade policies and market competition squeeze its profits. PDD Holdings, Temu’s parent company, recently reported a staggering 47% drop in first-quarter earnings, sending its US-listed shares tumbling over 13% in a single day.
The profit plunge comes as a perfect storm of challenges hits the company. In the US, the termination of a crucial trade exemption had dramatically changed the game for Chinese e-commerce players. The so-called “de minimis” rule previously allowed small-value packages under $800 to enter America duty-free – a loophole that fueled Temu and Shein’s explosive growth. Now, these companies face potential tariffs as high as 120%, forcing Temu to halt direct China-to-US shipments temporarily.
Domestic pressures add to PDD’s woes. A brutal price war with Alibaba and JD.com continues to erode margins in China’s sluggish consumer market. Chaiman Chen Lei pointed to “radical changes in external policy environments” as key factors behind the financial downturn, noting how trade tensions have created “significant pressure for our merchants”.
The trade winds may be shifting slightly, however. Recent US-China negotiations led to a temporary 50% reduction in those punishing tariffs for 90 days, offering some breathing room. But new challenges are emerging in Europe, where proposed €2 parcel fees could disrupt the direct-to-consumer model, and in the UK where customs rules for cheap imports may soon change.
As governments worldwide scrutinize Chinese e-commerce practices, PDD’s experience higshlights how geopolitical tensions are reshaping global online retail. The company’s dramatic profit drop serves as a warning sign for the entire cross-broader e-commerce sector, proving that even digital marketplaces can’t escape the impact of real-world trade policies.
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