Temu Scales Back in the U.S. Amid Sales Slump and Trade Policy Shifts

Temu, the fast-growing e-commerce platform owned by PDD Holdings $PDD, is facing a sharp decline in its U.S. market performance as the company significantly cuts its digital advertising targeted at American consumers. The decision comes in response to heightened regulatory uncertainty following President Donald Trump's recent tightening of trade restrictions with China.

Double-Digit Decline in Weekly Sales Reflects Waning Momentum

Between May 11 and June 8, Temu’s weekly U.S. sales plunged by over 25% year-over-year, highlighting the abrupt reversal in its previously aggressive growth trajectory. The platform, known for ultra-low prices and rapid promotional expansion, has noticeably reduced its presence across major digital ad ecosystems, including Meta $META and Alphabet's $GOOG Google Ads. The pullback in ad spending signals a strategic recalibration, likely aimed at mitigating exposure to potential sanctions or tariff-related headwinds. In contrast, rivals such as Amazon $AMZN, Walmart $WMT, and Shein are reporting renewed year-on-year growth following the mid-May U.S.-China trade détente.

Market Impact and Share Price Reaction

Shares of PDD Holdings dropped roughly 1% during Friday’s premarket session, reflecting investor concerns over Temu’s weakening U.S. position. While the dip was modest, it underscores growing skepticism about the sustainability of Temu’s international expansion, which had been one of the company’s primary revenue drivers since late 2023. The decline in U.S. traction coincides with rising geopolitical friction and increased scrutiny over data privacy, product quality, and supply chain transparency—factors that may pose persistent challenges for Chinese-origin platforms operating in Western markets.

Competitive Divergence Emerges

As Temu pulls back, competing platforms appear to be capitalizing on the shift in market dynamics. Their recovery has been aided by stabilized trade relations and a more predictable regulatory outlook, which allowed them to reaccelerate marketing campaigns and optimize cross-border logistics. Notably, Shein’s rebound in the fast-fashion category has gained particular momentum, with new U.S. warehouse integrations boosting delivery speed and customer retention.

Structural Pressures Behind Temu’s Decline

1. Advertising cuts: Reduced marketing spend has weakened brand visibility and acquisition rates.

2. Policy shifts: Tighter U.S. trade and regulatory frameworks increase operational risk for Chinese platforms.

3. Platform fatigue: Consumer novelty around deep discounts may be wearing off.

4. Logistics volatility: Ongoing disruptions in global shipping impact delivery reliability.

5. Competitive intensity: U.S.-based and hybrid e-commerce firms are regaining market share.

Outlook and Strategic Crossroads

Temu’s U.S. performance in Q2 suggests that the platform’s hyper-growth model may be entering a consolidation phase. Without aggressive promotion, sustained traction in price-sensitive segments could become increasingly difficult. PDD Holdings now faces a critical inflection point: double down on expansion under higher regulatory risk or shift focus toward more resilient markets with less exposure to geopolitical turbulence.