Temu Halts Direct China Shipments to U.S. as Trump Administration Closes Tariff Loophole

Temu announced on Friday that it has ceased direct shipments from China to U.S. customers, opting instead to fulfill all U.S. orders from local warehouses. The decision comes in response to the Trump administration’s closure of the “de minimis” tariff exemption, a loophole that previously allowed goods valued under $800 to enter the United States duty-free. The policy change, effective May 2, 2025, has sent ripples through the e-commerce sector, impacting platforms like Temu and its rival Shein, which have relied heavily on the exemption to offer ultra-low prices to American consumers.

The de minimis rule, in place since 2016, enabled companies to ship low-value packages from China without incurring import taxes or navigating extensive customs processes. This loophole fueled the rapid rise of Temu, owned by China’s PDD Holdings, which burst onto the U.S. market in September 2022 with aggressively priced goods—think $5 sneakers and $1.50 garlic presses. Shein, a fast-fashion powerhouse, similarly capitalized on the exemption to deliver trendy clothing at rock-bottom prices. According to U.S. Customs and Border Protection, de minimis shipments surged from 140 million a decade ago to over 1.3 billion in 2024, with Temu and Shein accounting for roughly 30% of these packages.

President Donald Trump, who has called the exemption a “big scam” that harmed American small businesses, signed an executive order in April to end the duty-free treatment for goods from mainland China and Hong Kong. The move aligns with Trump’s broader trade war, which includes tariffs of up to 145% on Chinese imports, with some levies potentially reaching 245% when combined with existing taxes. The White House has also cited concerns about the loophole facilitating the smuggling of illegal goods, including fentanyl, due to minimal customs inspections.

Temu’s pivot to a “local fulfillment model” was swift. By late April, the company began adding import charges of 130% to 150% on orders shipped from China, often doubling the cost of purchases. Days before the May 2 deadline, Temu overhauled its U.S. website and app to display only products stocked in American warehouses, labeling China-sourced items as “out of stock.” A Temu spokesperson told The New York Times, “Temu has been actively recruiting U.S. sellers to join the platform. The move is designed to help local merchants reach more customers and grow their businesses.” The company insists that pricing for U.S. consumers “remains unchanged” during this transition.

Industry experts, however, warn that Temu’s low-price model may face challenges. “With tariffs and the end of de minimis, the cost of doing business in the U.S. is rising for Temu,” said Neil Saunders, managing director of retail at GlobalData, in an interview with the Daily Mail. While Temu has been building U.S. inventory over the past year, its reliance on Chinese supply chains could strain its ability to maintain the dirt-cheap prices that drove its popularity. Shein, meanwhile, has also adjusted, raising prices and incorporating tariffs into checkout totals with a promise that customers “won’t pay extra at delivery.”

The closure of the loophole has drawn mixed reactions. Supporters, including Kimberly Glas, president of the National Council of Textile Organizations, hailed the move as a step toward leveling the playing field for U.S. manufacturers. “The loophole allowed unsafe and illegal Chinese goods into the U.S.,” Glas told The New York Times. Critics, however, argue that higher prices and potential shipping delays will hit American consumers hard, particularly those who relied on Temu and Shein as “inflation busters.” A UBS economist noted that while the tariffs may not immediately reflect in consumer price data, they serve as a “visible price increase” for shoppers.

The policy’s implementation has not been without hiccups. A brief suspension of the de minimis rule in February caused chaos at U.S. borders, with package pileups and delivery firms slapping on extra fees. This time, the Commerce Department claims to have systems in place to collect tariffs efficiently, though some analysts question whether customs infrastructure can handle the volume of over one billion annual shipments.

As Temu and Shein adapt, their shifts could reshape the competitive landscape. Amazon, which launched its budget storefront “Haul” to rival Temu, also faces scrutiny, as many of its third-party sellers source from China. Meanwhile, U.S. retailers like Walmart and eBay may gain an edge as foreign platforms grapple with higher costs. For now, Temu’s pivot to local fulfillment signals a new chapter for the e-commerce upstart—but whether it can retain its bargain-hunting fanbase remains an open question.

17GEN4.com