Temu Changes Model in the US: The Impact of Canceling Tax Exemptions and New Tariffs

What is Temu’s Strategic Shift in the US?

The Temu trading platform, which has grown rapidly in the US as a destination for ultra-cheap shopping directly from China, has been forced to make a sharp change in its business model. After establishing itself as a prominent player in the American market, Temu faces new regulatory challenges that require it to adapt its operations.

The main strategic change stems from the cancellation of the de minimis policy and the imposition of new tariffs on packages arriving from China. This policy, which was in effect until recently, allowed goods of relatively low value (up to $800) to be imported without paying customs duties. Its cancellation and the imposition of tariffs of up to 145% on packages from China, as part of President Trump’s economic policy, have created a new reality for Temu. As a result, the company has had to switch to a new format: selling only through local suppliers, while removing most of the products shipped from China.

Why Did Temu Have to Change Its Business Model in the US?

The main reason for the change in Temu’s business model in the US lies in significant regulatory changes. As mentioned, the cancellation of the de minimis policy, which granted a tax exemption on packages worth up to $800, is a key factor. This policy allowed Temu to offer particularly competitive prices, as it saved consumers customs and VAT costs.

In addition to the cancellation of the de minimis, new tariffs of up to 145% were imposed on packages arriving from China. These tariffs significantly increase the cost of products imported from China, thereby harming Temu’s competitiveness.

These changes are part of a broader trend of economic policy aimed at bringing production back to the US. The Trump administration, as part of the “Bring Manufacturing Home” campaign, is taking various steps to encourage American companies to manufacture in the US and not abroad. The cancellation of the de minimis and the imposition of tariffs are part of this effort.

It is important to note that the cancellation of the de minimis officially came into effect on May 3, 2025, by presidential decree of Trump. This date marks a turning point for Temu and other companies operating in a similar model.

How Does Temu Bypass Tariffs and Switch to Local Operations in the US?

In light of the significant regulatory changes, Temu has had to take creative steps to circumvent the new tariffs and maintain competitiveness in the American market. The main solution chosen is the transition to local operations in the US.

The practical meaning of this transition is that Temu has started selling products only through local suppliers in the US. All products currently sold to American customers are shipped from warehouses located within the US. In doing so, Temu manages to avoid paying tariffs on the products, as they are already inside the US and not imported from China.

In addition, Temu has removed most of the products shipped from China from its American platform. The company has started marking products originating in China as “out of stock”, thereby effectively eliminating the possibility of ordering directly from China through its American platform. This step is intended to ensure that all products sold to American customers are exempt from customs duties.

Temu has also stopped its aggressive digital advertising campaigns, which were a significant part of its growth strategy in the American market. Instead, the company has begun actively recruiting American sellers, with the aim of increasing the supply of local products on its platform.

Before the changes came into effect, Temu tried to pass on the cost of the new tariffs to consumers, presenting “import fees” of up to 150% of the product price. However, this move drew negative reactions from consumers, and the company chose a different strategic solution – establishing a local logistics system.

Currently, all products listed on the Temu website in the US are defined as “duty-free” and “not involving additional costs upon delivery”, in accordance with the change in the operating model.

The transition to local operations in the US is a significant step for Temu, highlighting its ability to adapt to regulatory changes. However, it is also a difficult challenge, as Temu needs to build a new logistics system and recruit local suppliers to continue to offer competitive prices to American consumers. For more information, read about Temu’s business model change in the US.

Who Else is Affected, What are the Implications, and What is Temu’s Financial Situation?

Temu is not the only one affected by the regulatory changes in the US. Other platforms, including Shein and even Amazon Haul – Amazon’s service for shipping cheap products from China – face similar challenges. Shein has already announced a price increase, while Amazon considered, and then retracted, presenting customs costs to consumers at the checkout stage.

The new tariffs, together with the cancellation of the de minimis, directly harm the profit model of many players who have operated in this method in recent years. These companies will have to find new ways to deal with regulatory challenges and maintain competitiveness in the American market.

Despite the challenges, Temu continues to show impressive growth figures. According to market estimates, the volume of goods sold on the platform in the US reached approximately $50 billion in 2024, a sharp jump from $17 billion in 2023. These data indicate the growing popularity of Temu among American consumers, and its ability to compete in the e-commerce market.

PDD Holdings stock, Temu’s parent company, rose 2.7% in early trading following the strategic adjustments, after a 0.38% increase last Thursday. The market positively assesses the move as a quick and meaningful response to regulatory changes, but aspires to see if Temu can continue to compete in prices and variety over time – without direct access to the Chinese supply chain.

The market fears that Temu will find it difficult to maintain its competitive advantage over time, given its dependence on the Chinese supply chain. However, Temu has so far proven its ability to adapt to changes and find creative solutions to the challenges it faces.

What is the Meaning of the Transition to a Local Model for Temu’s Future in the US?

The transition to a local sales model in the US highlights Temu’s organizational flexibility in the face of dramatic policy changes. The company has proven that it is able to respond quickly to regulatory changes and make significant adjustments to its business model.

However, this is a fundamental challenge for a company that has based its advantage on extremely cheap goods from China. Temu will have to find new ways to maintain competitiveness in the American market, while dealing with tight regulation and high tariffs.

The central question that remains open is whether Temu will succeed in maintaining its competitiveness in the American market – even under tight regulation and high tariffs. The answer to this question will determine Temu’s future in the US.