TEMU - It's over for the Chinese e-commerce platform

TEMU, a popular Chinese e-commerce platform known for its ultra-low prices, is facing significant disruption due to recent tariff policies implemented by the Trump administration as of April 9, 2025. These policies, which took effect just after midnight on Wednesday, April 9, 2025, are reshaping the landscape for TEMU and similar retailers by imposing new costs on imports that were previously exempt.

Historically, TEMU relied heavily on the "de minimis" exemption, a U.S. trade rule that allowed shipments valued under $800 to enter the country duty-free. This loophole enabled TEMU to ship small, low-cost packages directly from Chinese manufacturers to American consumers without incurring tariffs, keeping prices rock-bottom and fueling its rapid growth. However, President Donald Trump signed an executive order eliminating this exemption for goods from China and Hong Kong, effective May 2, 2025, while also imposing immediate tariffs averaging 29% on goods from dozens of nations, with rates as high as 54% on Chinese imports.

For TEMU, this means that its core business model—offering dirt-cheap goods like clothing, gadgets, and household items—is under threat. Starting May 2, shipments will face either a 30% tax on their value or a flat $25 per item, significantly increasing costs. For example, a $5 item that once shipped duty-free could now cost $30 with the flat fee, a sixfold increase. Even with the percentage-based tariff, costs would rise substantially, eroding TEMU’s competitive edge. Unlike competitors like Alibaba, which derives much of its revenue from markets outside the U.S., TEMU’s heavy reliance on American shoppers makes it particularly vulnerable.

The immediate impact of the broader tariffs, effective April 9, 2025, is already hitting TEMU’s supply chain. Goods imported after this date are subject to the new rates, and while TEMU has not publicly confirmed plans to pass these costs onto consumers, experts suggest that companies typically shift at least a portion of such increases to buyers. This could mean higher prices on TEMU’s platform, potentially alienating its budget-conscious customer base. Alternatively, absorbing the costs could slash profit margins, forcing TEMU to rethink its strategy.

TEMU has taken some preemptive steps, such as shifting to a "semi-managed" model where sellers stock inventory in U.S. warehouses to avoid direct imports. However, the scale and speed of the tariff changes—described as worse-than-expected by analysts like Citi’s Alicia Yap—may overwhelm these efforts. The closure of the de minimis loophole, in particular, is a direct hit, as it was the backbone of TEMU’s ability to flood the U.S. market with inexpensive products. Sheng Lu, a professor at the University of Delaware, noted that TEMU’s lack of diversified sourcing (unlike some peers who use countries like Vietnam or Bangladesh, which face lower tariffs) compounds its challenges.

The broader economic ripple effects are also notable. Critics argue that TEMU’s model undercut U.S. retailers like Forever 21, which blamed cheap imports for its recent bankruptcy. Posts on X reflect sentiment that TEMU’s “predatory” use of the loophole harmed American businesses, while others lament the potential loss of affordable goods. Meanwhile, China has vowed countermeasures, escalating tensions that could further complicate TEMU’s operations.

In short, TEMU’s disruption stems from a one-two punch: immediate tariffs hiking import costs and the impending end of the de minimis exemption threatening its low-price promise. Whether it can adapt—by raising prices, shifting supply chains, or eating losses—remains uncertain, but its days of unchecked bargain dominance in the U.S. are likely numbered.

17GEN4.com