PDD Holdings, the Chinese parent company of online marketplace Temu, has reported a nearly 50% drop in first-quarter profits, citing the impact of US trade policies and intense competition in China’s domestic market.
The e-commerce giant’s US-listed shares fell over 13% following the announcement. PDD Holdings’ profit for the first three months of the year dropped to 14.74 billion yuan ($2.05 billion, £1.5 billion), representing a 47% year-on-year decline.
US Tariff Policy Changes Affect Business
A key factor behind the decline has been the Trump administration’s recent end to the “de minimis” exemption, which previously allowed parcels worth under $800 to enter the US duty-free. This change, effective early May, exposed companies like Temu and Shein to import tariffs as high as 120%.
In response, Temu announced it would halt direct shipments from China to US customers. However, following a recent easing of trade tensions, tariffs on small packages were temporarily reduced by over half for 90 days.
Domestically, PDD faces fierce price competition from Alibaba and JD.com amid weak consumer spending. Chairman Chen Lei attributed the profit drop to “radical changes in external policy environments such as tariffs” and increased pressure on merchants from the ongoing US-China trade conflict.
Beyond the US, Temu and competitors are confronting new challenges in Europe and the UK. The European Union has proposed a €2 flat fee on billions of small parcels delivered directly to consumers, a charge that online marketplaces would be expected to cover. Meanwhile, UK officials are reviewing customs treatment of low-value imports following retailer complaints.
Author’s Opinion
This case highlights how trade policy shifts can drastically alter the playing field for global e-commerce giants. While tariffs aim to protect domestic industries, they can also stifle growth and innovation in the international market. Companies like Temu must now navigate increasingly complex regulatory environments, forcing them to rethink supply chains and sales strategies. Policymakers should balance protection with support for digital trade to avoid harming consumers and businesses alike.
