A picture shows a package from Temu in front of a screen displaying the Temu logo. Following a significant policy shift by former President Donald Trump, Temu, a prominent Chinese online retailer, is adjusting its strategy. The change comes after the President decided to eliminate a long-standing tax loophole, sparking notable changes in Temu’s operations.
This loophole, known as “de minimis,” has been around for nearly a century, enabling e-commerce companies to ship goods valued under $800 into the U.S. without paying duties. Over the recent weekend, Trump suspended this exemption by introducing new tariffs that include an additional 10% tax on Chinese products.
This move has particularly impacted companies like Temu and Shein, who have experienced significant growth in the U.S. market. By leveraging the de minimis provision, these companies were able to keep prices low on a range of products, from fashion and footwear to home goods and tech gadgets.
In response to this policy shift, Temu is now actively promoting products that can be shipped from within the U.S. rather than from China. A look at Temu’s “Lightning deals” section reveals that items with a green “local” label now dominate, indicating they are stored in U.S. warehouses.
Focusing on local inventory not only speeds up delivery times for customers but also reduces Temu’s dependence on shipments directly from China. Interestingly, despite the storage location, many of these “local” products are still sold by companies based in China.
Attempts to get a comment from Temu’s representatives were unsuccessful.
This strategic pivot by Temu to highlight U.S.-based inventory places the company in closer competition with major U.S. retailers like Amazon, eBay, and Walmart. These giants also collaborate with Chinese suppliers to stock their warehouses. Last year, Amazon observed Temu and Shein’s rapid U.S. expansion and responded by launching its budget-friendly platform, Haul.
Owned by PDD Holdings, Temu started working with sellers holding U.S. inventory earlier this year. By midsummer, approximately 20% of its U.S. sales originated from these domestic sellers, according to research from Marketplace Pulse.
Facing tightening customs requirements, Temu, Shein, and other Chinese e-commerce players are striving to adapt without disrupting their operations. A recent hiccup occurred when the U.S. Postal Service unexpectedly halted incoming packages from China and Hong Kong, only to reverse the decision within half a day.
This regulatory uncertainty has led to fluctuations in PDD’s stock prices, with significant shifts noted earlier this week. Critics argue that the de minimis rule has given an undue advantage to Chinese retailers, leading to a surge in minimally inspected imports, raising concerns about counterfeit and unsafe items.
Meanwhile, supporters of the de minimis rule caution that its removal could overwhelm customs officials and increase government expenditures. Hugo Pakula of Tru Identity, highlights concerns about increased screenings, noting the current infrastructure isn’t prepared for such rapid growth.
U.S. Customs and Border Protection reported handling over 1.3 billion de minimis shipments in 2024, with a significant percentage likely owing to companies like Temu and Shein.
Shein, too, is making strides to capture the U.S. market, having established distribution centers in various states and a supply chain hub in Seattle aimed at speeding up delivery for American customers.
With these developments unfolding, the competitive landscape for budget-friendly e-commerce solutions remains dynamic.
