PDD Holdings, the Shanghai-based parent company of bargain shopping platform Temu, saw quarterly profits collapse by nearly half as escalating US-China trade tensions and domestic market struggles converged.
The Nasdaq-listed firm reported Q1 profits of 14.74 billion yuan ($2.05bn), triggering a 13% stock plunge as investors reacted to the dismal earnings and changing global trade landscape.
The financial hemorrhage comes after President Trump’s early May termination of the “de minimis” exemption that allowed Chinese merchants to ship sub-$800 parcels tariff-free to American consumers.
This policy shift immediately subjected Temu and rival Shein to crushing 120% import duties, forcing Temu to halt direct China-to-US sales. While a temporary 90-day tariff reduction offered partial relief, analysts warn the damage to PDD’s cross-border operations may be lasting.
Beyond international headwinds, PDD faces intensifying competition in its home market against Alibaba and JD.com, with chairman Chen Lei citing “radical changes in external policy environments” and a brutal price war during China’s consumer spending slump.
These challenges has squeezed margins at Temu’s parent company, which had previously relied on ultra-cheap Chinese manufacturing and tax loopholes to undercut Western retailers.
The trade war fallout extends beyond American borders, with the EU proposing a €2 flat fee on direct-to-consumer parcels and the UK reviewing customs rules for low-value imports.
These measures target the business models of Temu and Shein, which have flooded Western markets with inexpensive goods shipped directly from Chinese warehouses. UK Chancellor Rachel Reeves’ planned policy review signals growing global resistance to what traditional retailers call unfair competition.
Why It Matters
With its stock valuation reeling and trade policies evolving, PDD must now navigate uncharted territory. The company’s leadership acknowledges merchants face “significant pressure” but hasn’t detailed how Temu will adapt its supply chains or pricing structures.
There are suggestions that Temu may need to establish overseas warehouses or forge new manufacturing partnerships in third countries to circumvent mounting trade barriers.
As the 90-day US tariff reprieve ticks down, it remains to be see whether the Trump administration will extend the relief—and how PDD’s bargain-hunting platforms can survive in an era of increasing protectionism and regulatory scrutiny across Western markets.
