Temu shoppers might not see as many tariff-related price hikes as expected.
The Chinese e-commerce site’s parent company, PDD Holdings, says it will subsidize some merchants after Trump ended a trade loophole that allowed packages valued at less than $800 to enter the country duty-free.
Temu already blocked US consumers from buying directly from Chinese distributors; their only option is to purchase goods from local warehouses that stocked up before Trump’s policy took effect. But as inventory runs low, PDD Holdings says it’s also using billions in subsidies to help shoulder the tariff costs.
PDD has faced vendor pushback unrelated to tariffs. As The Wall Street Journal reports, a group stormed an affiliate’s office in Guangzhou last year to protest what they said were unfair penalties. PDD responded with a 10 billion yuan ($1.4 billion) “fee reduction program for merchants” in 2024 and expects to allocate another 100 billion yuan ($13.76 billion) this year.
“If we do nothing, merchants will be overwhelmed by these external shocks,” PDD co-CEO Lei Chen said in an earnings call. “Only when merchants strive can consumers receive quality products and services.”
PDD executives also said the company will explore more fee-reduction initiatives. “For example, under the 10 billion program, we launched a new 10 billion merchants gift back program, offering additional coupons across all categories to meet diverse consumer demand,” added PDD’s other co-CEO, Jiazhen Zhao, in the call.
The investments risk reducing PDD’s profits in the short-term, but the goal is to create a strong ecosystem of vendors over the long-term to support the company’s business, which also includes Pinduoduo, an e-commerce platform in China. In Q1, the company’s net income decreased year-over-year by 47%, although revenue was up by 10%.
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Temu didn’t immediately respond to a request for comment, making it unclear how the subsidies translate to lower prices for US consumers. But in the earnings call, the co-CEO Chen noted: “No matter how policies shift, we’ll continue to strengthen our operations in the markets we serve, helping more local merchants grow on our platform and enabling more orders to be fulfilled from local warehouses.”
It’s also possible that Trump could further lower tariffs on Temu if the White House reaches a trade deal with China. The Trump administration was previously tariffing Chinese-sourced packages at 120%, but lowered it to 54% earlier this month.
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About Michael Kan
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