Chinese online marketplace Temu, which became famous for selling a wide range of products priced between $1 and $50, appears to be suffering the consequences of harsh decisions it made a few months ago in response to a growing threat.
In April, President Donald Trump made several crucial changes to his tariff policy (tariffs are taxes companies pay to import goods from overseas). He imposed a whopping 145% tariff on all goods imported from China.
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Trump also signed an executive order on April 2 to end a trade rule called “de minimis,” which took effect in May. This rule allowed goods from China that are less than $800 to enter the U.S. country duty-free with minimal inspections.
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He also issued an executive order on April 9 imposing a 120% tax on small parcels under $800 from China, Hong Kong, and Macau.
In response to these changes, Temu posted a notice on its website warning customers that it will have to increase its prices.
“Due to recent changes in global trade rules and tariffs, our operating expenses have gone up,” said Temu on its website. “To keep offering the products you love without compromising on quality, we will be making (a) price adjustment starting April 25, 2025.”
Temu also quietly pulled back its advertisements on Google, Instagram, and Facebook, and saw its ranking on the App Store in the U.S. fall from the top 10.
However, in May, Trump announced that the U.S. had lowered its 145% tariffs on China to 30%. The 120% tax on small parcels also dropped to 30%, which provided some relief to Temu.
Image source: Raul Ariano/Bloomberg via Getty Images
Temu is facing startling change in customer behavior
Despite these changes, Temu has seen the number of its daily app users in the U.S. drop by 58% in May, according to recent data from Sensor Tower.
A recent report from Reuters also revealed that Temu’s average customer growth in January was 37.5% year-over-year, and in May, that average dropped to 8.8%. The retailer’s average sales growth was also 14.4% in January, but in May, sales stopped growing and declined by 15.7%.
The drop in sales comes after Temu decided last month to stop shipping products from China and sell directly to customers in the U.S. in a desperate attempt to keep prices low on its website.
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“All sales in the U.S. are now handled by locally based sellers, with orders fulfilled from within the country,” said Temu in a statement. “The move is designed to help local merchants reach more customers and grow their businesses.”
It also added a notice on its website informing customers that there will be no extra charges for items shipped from local warehouses.
“No import charges for all local warehouse items and no extra charges upon delivery,” said Temu on its website. “Items marked with the ‘Local Warehouse’ tag are shipped from within your country or region. This means you do not need to pay any import taxes or customs fees.”
Temu owner sounds alarm on a major problem
It is no surprise that fewer consumers are making purchases on Temu’s website, as many are concerned about encountering higher prices due to Trump’s tariffs.
According to a survey from Omnisend in February, 56% of Americans are worried that tariffs will increase prices. Also, 29% of Americans said that if prices rise, they would immediately stop or make fewer purchases from sellers in China.
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Amid this change in consumer behavior, Temu’s parent company, PDD Holdings, revealed in its first-quarter earnings report for 2025 that its operating profit (a company’s profit after expenses) declined by 38% year-over-year during the quarter.
During an earnings call on May 28, PDD Holdings Co-CEO Lei Chen said the decrease in operating profit was partially due to the company’s merchants being “under considerable pressure” due to tariffs.
“Radical change in external policy environment such as tariffs has created significant pressure for our merchants, who often lack the capability to adapt quickly and effectively,” said Chen.
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