Temu Owner’s Profit Takes 47% Hit as Trade Tensions With US Escalate

PDD Holdings, the Chinese tech company behind discount shopping platform Temu, reported a 47% drop in quarterly profit, highlighting how mounting trade tensions and strategic investments are squeezing short-term performance.

The company posted a net profit of 14.7 billion yuan ($2 billion) for the first quarter of 2025, compared to the same period last year. The sharp dip comes as the United States, under President Trump, escalates its economic standoff with China—most recently by scrapping a key customs exemption on lower-value imports, which had long propped up platforms offering ultra-cheap goods like Temu.

A Business Model Under Pressure

The now-revoked “de minimis” rule, which allowed goods under $800 to enter the US duty-free, was central to Temu’s cross-border pricing strategy. Without it, Temu and similar platforms are facing steeper costs and tighter margins when selling into their largest overseas market.

Trump’s latest executive order slashed the tariff rate to 54% or a $100 fee for items shipped through the US Postal Service—replacing the previous steep 120% tariff but still a heavy blow to China-based exporters.

PDD Bets on Long-Term Gains Over Short-Term Profit

Despite the drop in earnings, PDD’s leadership remains upbeat about their long-term prospects. Co-CEO Lei Chen said the company has been making major investments to help both sellers and customers adapt to “rapid changes in the external environment.”

“These investments weighed on short-term profitability but gave merchants the room to adapt,” he explained, adding that the company remains focused on strengthening Temu’s platform resilience and ecosystem.

Revenue grew by 10% year-on-year to 95.7 billion yuan, but the pace of growth continues to slow. For context, the company had reported 24% growth the previous quarter—and a staggering 131% at the start of 2024. According to PDD’s VP of Finance, Jun Liu, this moderation was anticipated, though clearly intensified by global uncertainty and the shifting policy landscape.

“Our financial results may continue to reflect the impact of sustained investments through these uncertain times,” Liu cautioned.

Wall Street Reacts Sharply

Investors were quick to respond, with PDD’s New York-listed depository receipts plunging over 13% following the earnings announcement. Market analysts cite not only the profit slump but also concerns over regulatory pressures and weakening growth momentum in a now more protectionist U.S. market.

The Road Ahead for Temu

As PDD Holdings doubles down on supporting its sellers and navigating political headwinds, the company is walking a tightrope—balancing short-term profitability against long-term viability.

While the broader e-commerce landscape continues to evolve, especially in light of geopolitical shifts, platforms like Temu may need to reinvent their cost and logistics models to stay competitive in a less globalized, more fragmented trade world.

{Source: IOL}

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