Temu Crushed by US Small Package Tax | Generated by AI
Question: Is Temu significantly hurt by the small package tax (de minimis tariff changes) in the USA market?
Answer:
Yes, Temu has been significantly hurt by the elimination of the de minimis exemption and related tariff changes in the US market.
The de minimis rule previously allowed shipments valued under $800 to enter the US duty-free without extensive customs procedures. This “loophole” was a key enabler for Temu’s (and similar platforms like Shein’s) ultra-low-price model, as it permitted direct shipping of cheap goods from Chinese factories to US consumers without tariffs or added fees.
Key timeline and impacts in 2025:
- The exemption ended for goods from China (Temu’s primary source) effective May 2, 2025, with initial tariffs reaching up to 120% or flat fees (later adjusted, e.g., to 54% in some cases as part of trade negotiations).
- It was extended globally (all countries) on August 29, 2025.
- This forced Temu to overhaul its US operations: It halted or reduced direct shipments from China, shifted to US-based warehouses/distributors for bulk imports, raised prices on many items, added import charges (sometimes exceeding product costs), cut aggressive advertising spend, and saw reduced product availability/stock issues.
Reported effects on Temu in the US:
- Daily active users plunged 52% in May 2025 compared to March.
- Sales/GMV dropped sharply (e.g., to less than 30% of early 2025 levels in some periods).
- Traffic, app usage, and demand fell significantly.
- The company attempted recoveries like price slashes (up to 60% on some items), resuming some China shipments after temporary trade “truces,” and expanding local fulfillment—but overall growth slowed dramatically.
As of early 2026, the de minimis closure remains in effect (reaffirmed by the White House even after a Supreme Court ruling struck down other tariffs). Temu continues adapting (e.g., more domestic sellers, regional warehousing), but the loss of the duty-free advantage for small packages has fundamentally challenged its low-cost, fast-direct-shipping model, leading to higher consumer prices, lower competitiveness against domestic retailers, and reduced US market performance.
In short, the “little thing tax” (de minimis tariffs on small packages) has been a major headwind for Temu in the US, contributing to a substantial slowdown compared to its pre-2025 rapid growth.
References:
- Trump Doubles Down on Closing Tax Loophole on Cheap Imports
- Retail panic: What the end of the ‘de minimis’ exemption means for brands across the globe
- De Minimus is ending: What’s next for US importers
- De Minimis: 2026 Trump Changes and Effects on Consumer Costs
- How the Change of a Tax Exemption Impacts and Resets Buying Behavior on International Marketplaces