In February 2023, Temu, a budget shopping platform owned by China’s PDD Holdings, made a high-profile entry into the global e-commerce market by purchasing a Super Bowl advertising slot, a costly move that underscored its aggressive expansion strategy. The 30-second commercial highlighted Temu’s ultra-low prices and wide product range, driving a 45% surge in app downloads the day it aired. The platform’s rapid growth was built on leveraging China’s extensive manufacturing network and a distribution model that minimized import tariffs, particularly benefiting from the United States’ "de minimis" exemption for low-value shipments.
Temu’s initial success depended heavily on its ability to ship consumer goods directly from Chinese warehouses to customers overseas at minimal cost. The parent company’s experience with Pinduoduo, one of China’s largest e-commerce platforms, provided Temu with access to a vast, efficient supply chain rooted in China’s specialized manufacturing hubs. Cities like Yiwu in Zhejiang province, known for massive wholesale markets and dense clusters of small goods suppliers, supplied a significant portion of Temu’s product offerings.
A critical factor enabling Temu’s low prices was the US policy allowing parcels valued under $800 to enter duty-free, facilitating affordable direct shipping to American consumers. Around 60% of these imports during fiscal 2023 came from China, according to US Customs data. Temu’s platform consolidated small batches of goods from various merchants, reducing logistics expenses and maintaining eligibility for the duty exemption.
However, this business model began to face regulatory headwinds shortly after Temu’s US launch. In April 2023, a US congressional advisory body singled out the de minimis exemption as a factor aiding Chinese e-commerce growth at the expense of customs enforcement. Concerns about product quality and intellectual property infringement were also raised.
The disruption came in May 2025 when the US government eliminated duty-free treatment for low-value parcels from China and Hong Kong, later expanding this change worldwide. This shift increased costs for Temu and other platforms, resulting in a 48% drop in Temu’s daily US users within two months. Analysts warned that higher prices risked alienating Temu’s predominantly price-sensitive customer base.
In response, Temu has accelerated a strategic pivot, moving inventory closer to consumers by encouraging US-based sellers and adopting a "semi-managed" model where merchants handle greater responsibility for overseas logistics and warehousing. As of early 2025, roughly 20% of US orders were fulfilled by local sellers, reflecting the platform’s adjustment to the dismantling of the de minimis advantage.
Similar regulatory changes have unfolded in other markets. Since July 2024, the European Union imposes customs duties on low-value e-commerce imports, ending previous exemptions. About 91% of the 4.6 billion low-value parcels entering the EU in 2024 originated from China. Countries such as Thailand and South Africa have also introduced new duties on small parcels, tightening cross-border e-commerce regulations globally.
PDD Holdings has acknowledged the challenges posed by these shifts. At its latest earnings report, co-CEO Zhao Jiazhen noted that increased costs and reduced fulfillment efficiency would impact cross-border operations. He emphasized that Temu plans to deepen local infrastructure investments and incorporate more domestic merchants to adapt its model.
Beyond logistics, Temu is exploring changes to its product mix. The diminishing viability of a low-price, direct-from-China strategy is encouraging a move toward branded products with higher margins. In March 2024, PDD launched Xinpinmu, a multi-billion-yuan initiative aimed at developing proprietary brands by integrating Pinduoduo’s supply chain with Temu’s global market access.
Despite challenges to its original model, Temu’s evolution reflects broader trends in China’s cross-border e-commerce sector, which faces increasing regulatory scrutiny but seeks to upgrade from low-cost goods to higher-value offerings. The platform’s future will likely combine direct shipping where feasible with local warehousing and a product lineup that balances affordability with brand strength.
Trade tensions and policy negotiations between the US and China continue to influence the environment for Temu and similar companies. Recent diplomatic engagements have kept tariff policies under discussion, highlighting the sensitivity of cross-border e-commerce to changes in trade rules. For industry leaders, the period ahead is seen as critical for moving beyond an era defined solely by the lowest prices and toward building sustainable global brand competitiveness.