Temu Shifts to Local US Sellers as China Import Costs Soar

Temu has completely abandoned its signature model of selling cheap Chinese imports to US consumers.

The e-commerce platform announced on May 2, 2025 that it's switching to what it calls a "local fulfillment" model, where it will exclusively sell goods from US-based merchants for the foreseeable future^1,^14.

This strategic overhaul comes directly in response to President Trump's steep 145% tariffs on Chinese imports and the elimination of the "de minimis" exemption, which had previously allowed packages valued under $800 to enter the country duty-free^1,^3.

That exemption officially ends today, May 2, 2025, forcing Temu's hand in what industry watchers are calling an inevitable but still stunning reversal of its core business strategy.

The Rise and Transformation of Temu

Temu, owned by Chinese e-commerce giant PDD Holdings $PDD ( ▲ 2.2% ) , burst onto the American retail scene in 2022 with a straightforward value proposition – incredibly low prices on everything from clothing to household goods, shipped directly from Chinese manufacturers^11,^14.

The platform's slogan "Shop like a billionaire" resonated with budget-conscious American consumers, and its growth was nothing short of meteoric.

Temu's Explosive Growth (2022-2024)
- September 2022: Launch in the US market
- October 2022: 5.8 million US users
- April 2023: 104.2 million US users
- 2024: 292 million monthly active users worldwide
- 2024: $70.8 billion in gross merchandise value

By early 2025, Temu had established itself as a major player in US e-commerce, with 185.6 million monthly active users in the United States alone^13.

The platform's success was largely built on its ability to offer products at prices that traditional US retailers simply couldn't match, made possible by direct shipping from Chinese manufacturers and strategic use of the de minimis exemption^5.

Trump Tariffs Force Temu's Hand

The landscape for Chinese e-commerce platforms in the US changed dramatically when President Trump imposed a sweeping 145% tariff on Chinese imports and announced the end of the de minimis exemption^8.

This one-two punch made Temu's original business model financially unsustainable overnight.

In late April, Temu attempted to adapt by adding transparent "import charges" to orders from China. These charges, typically matching the 145% tariff rate, often exceeded the cost of the products themselves^8,^10:

The reaction from consumers was swift and negative.

Many longtime Temu shoppers expressed their disappointment on social media platforms^8.

The New Temu: Local Fulfillment Strategy

Rather than continuing with the unsustainable import charges, Temu is now pivoting completely to a domestic model.

The company has begun actively recruiting US merchants to sell on its platform, with all products to be sourced and shipped within the United States^1,^6.

This transition had been foreshadowed earlier in the week when US users of Temu suddenly discovered they could only see products labeled as "Local" on the platform^3.

These items were already present in US warehouses, having been imported before the new tariffs took effect.

Temu's Evolution of Supply Chain Strategies
1. Original Model: Direct shipping from China to US consumers
2. Half-Custody Approach: Bulk shipping to US warehouses with Temu controlling marketplace
3. Import Charge Phase: Adding 145% fees to Chinese products (April 25-April 30, 2025)
4. Local Fulfillment Model: US-based merchants only (May 2, 2025 onward)

The company insists this change won't affect prices for American consumers, though many analysts remain skeptical about whether Temu can maintain its ultra-low price positioning while sourcing products domestically^11.

Market Impact and Competitive Landscape

The impact of Temu's business model shift extends far beyond its own customer base.

The platform had become a significant competitor to traditional US retailers, with particularly high customer overlap with discount stores^16:

What's particularly notable is that Temu shoppers tend to be high-value customers for these traditional retailers.

For instance, Temu shoppers spend 45% more at Dollar Tree than the average customer, 34% more at Walmart, and 31% more at Dollar General^16.

This strategic pivot may provide temporary relief for these retailers, as Temu's competitive advantage in pricing will likely diminish.

However, it remains to be seen whether Temu can develop new advantages in the crowded US e-commerce space.

Broader Trade War Implications

Temu's dramatic shift is just one vivid example of how the intensifying US-China trade tensions are reshaping global commerce.

Analysts from Barclays recently noted that the competing tariffs between the US and China are so large they effectively represent "a trade embargo on both sides"^4.

The market reaction to this changing landscape has been dramatic.

Since the announcement of significant tariffs, Temu has dramatically reduced its online advertising expenditure in the US.

Its ranking in Apple's app store has plummeted to No. 73 after consistently being in the top 10^8.

Meanwhile, competitor Shein has fallen to No. 54 from its previous position of 15.

What This Means for Consumers and Investors

For consumers, the end of Temu's Chinese import model likely means the days of extraordinarily low prices are over.

While the company claims it will maintain competitive pricing through its new local fulfillment approach, the economics of US-based sourcing will inevitably lead to higher price points than before.

Timeline of Temu's Response to Tariffs
- April 20, 2025: Reduced advertising spending by 80% on Google and Meta
- April 25, 2025: Implemented price increases across the platform
- April 26-28, 2025: Added "import charges" of approximately 145% to Chinese products
- April 30, 2025: Restricted US users to viewing only "Local" products
- May 2, 2025: Officially announced shift to local fulfillment model

For investors, this rapid pivot demonstrates both the vulnerability and adaptability of cross-border e-commerce platforms in the face of changing trade policies.

It also underscores the continued advantage of established US retailers with domestic supply chains that are less exposed to international trade disputes.

The Future of Cross-Border E-Commerce

Temu's shift highlights the end of an era in cross-border e-commerce that had been characterized by direct-to-consumer shipping from Chinese manufacturers.

This model, which bypassed traditional importers and retailers, had created a new category of ultra-discount online shopping.

Other Chinese platforms like Shein are taking different approaches to the same challenge.

While Shein has also raised prices, it has opted to bake the tariffs into the listed prices rather than showing separate import charges^2.

Whether either approach will be successful in the long term remains to be seen.

For Temu specifically, the success of its new model will depend on whether it can recruit enough US merchants to maintain a compelling product selection, while still offering prices that differentiate it from established players like Amazon $AMZN ( ▲ 1.89% ) and Walmart $WMT ( ▼ 0.16% ) .