Daily US users of Chinese discount e-commerce platform Temu fell 58% in May following the White House’s elimination of the “de minimis” trade provision that allowed tariff-free shipping of low-value packages from China, according to market intelligence firm Sensor Tower.

The dramatic user decline reflects mounting challenges for PDD Holdings’ global platform amid escalating US-China trade tensions.

Temu responded to the policy change by slashing US advertising spending and restructuring its order fulfillment strategy after losing the competitive advantage that had enabled years of direct-to-consumer shipping from Chinese suppliers.

President Donald Trump’s sweeping trade tariffs have forced both Temu and rival fast-fashion platform Shein to raise prices, but Temu has struggled more significantly than its competitor.

While Shein has managed to increase average customer spending compared to a year ago, Temu has failed to maintain similar growth momentum, according to data from consultancy Bain & Company.

“While the tariff environment is uncertain, if the status quo remains for an extended period, we believe Temu’s competitive threat will continue to weaken,” Morgan Stanley equity analyst Simeon Gutman wrote in a May research note, citing significantly reduced engagement following the exemption’s end.

PDD Holdings’ first-quarter earnings fell short of growth estimates, with executives acknowledging during analyst calls that tariffs created significant pressure for merchants on the platform.

The company reiterated pledges to maintain stable pricing while working with merchants across different regions.

Temu has shifted from its original business model, where the company managed logistics, pricing, and marketing while merchants handled ordering and supply.

Under the new local fulfilment approach announced in early May, merchants must handle tariffs, customs charges, and documentation for individual orders shipped from China to Temu-partnered US warehouses.

The platform continues managing order fulfilment near customers, price setting, and online operations under the revised structure.

Despite US challenges, HSBC analysts noted that Temu’s growth in non-US markets has accelerated, with international users representing 90% of its 405 million global monthly active users in the second quarter.

“New user uptick grew swiftest in less affluent markets,” HSBC analysts observed, suggesting Temu is finding success in emerging economies despite US headwinds.

The policy changes have effectively ended years of competitive advantage that Chinese e-commerce platforms enjoyed through the de minimis provision, which exempted packages valued under $800 from tariffs and simplified customs procedures.

Both Temu and Shein had built business models around this loophole to offer ultra-low prices to American consumers.

Temu did not respond to requests for comment regarding the user decline or broader US market challenges facing the platform.