‘Shop like a billionaire,’ Chinese ultra-low-cost e-commerce platform Temu imprinted on consumers, shaking up the online retail landscape when it entered the US in 2022. The core of its success was price. Character socks for $1, desk lamps for $2….
This price competition was possible thanks to US duty-free systems. Through the ‘de minimis’ rule, the US did not impose tariffs on low-value imports under $800. Temu actively utilized this system by having Chinese sellers ship products directly to US consumers. Naturally, criticisms arose that it was a &lsquoloophole’. Temu was able to significantly reduce tariff and inventory cost burdens.
The effect of price competitiveness was huge. As a result of market research firm Bespoke Intelligence analyzing Temu’s best-selling products early in its entry, 55 to 60% of the products were also sold on Amazon, but 95% of them were cheaper on Temu. It was common for Amazon’s price to be more than double. For consumers, there was sufficient reason to choose the overwhelmingly low price in exchange for waiting a little longer for delivery.
Of course, there were problems too. Concerns were raised that the seller’s identity, quality, and accountability for recalls and accidents were unclear. In fact, the Consumer Product Safety Commission (CPSC) issued a stop-use warning stating that magnetic products sold on Temu did not meet federal safety standards. In addition, the Federal Trade Commission (FTC) took issue in 2025 with Temu failing to disclose high-risk seller information and methods for reporting illegal, counterfeit, and dangerous products, resulting in Temu being fined $2 million.
A decisive change in Temu’s ultra-low-cost formula occurred thereafter. The federal government abolished the de minimis tax exemption for low-value imports from China and Hong Kong under $800 on May 2 of last year, and expanded it to all countries in August. It was around this time that Temu’s ads visibly decreased. According to data analytics firm Sensor Tower, daily US users of Temu in May 2025 plummeted by 48% compared to March. Analysis also showed that app downloads dropped by 54% and website visits by 20% immediately after the advertising cuts.
Instead of shipping from China, Temu increased the proportion of local delivery by bringing in goods in bulk and storing them in US warehouses. With tariffs, customs clearance fees, and warehousing costs added, it became difficult to maintain previous prices. At the time, changes in price tags could be felt within days.
Many predicted Temu’s downfall. However, an interesting twist is emerging. Temu has not disappeared. According to marketing research firm Comscore, Temu’s unique US visitors last June reached 108.2 million, a 79% surge from 60.6 million a year ago. Traffic actually increased compared to before the tariff shock. Of course, the rebound was not free. Parent company PDD Holdings saw second-quarter revenue increase by 8.1%, but net income decreased by 12%, and selling and marketing expenses rose by 9.2%.
Why have consumers returned to Temu even though prices have risen and doubts about safety and quality persist? Recent studies showed that Shein and Temu customers prioritize realistic factors like price and convenience while recognizing environmental and ethical issues. Ultimately, the answer is price again. Even if it is not as unconventional as before, if it is cheaper than existing retailers and ‘Made in USA’ products, it provides sufficient reason to buy for consumers crushed by the cost of living.
Temu’s revival is not simply a story of duty-free arbitrage. Raising tariff barriers may weaken the price competitiveness of ultra-low-cost imports. However, the essence is why consumers look for ultra-low-cost goods. In situations where the burden of living costs such as housing, groceries, and insurance is heavy, consumers are bound to prioritize price over concerns about safety and quality.
For the competitiveness of US products and US retailers to increase, consumers’ disposable income must grow. This is because when consumers have deep pockets, they have the leeway to consider quality, safety, service, and origin beyond just price. To stop Temu, shouldn’t we prevent consumers from having to look for the cheapest option rather than relying on tariffs?
