The elimination of a tariff loophole, which previously benefited online retailers Temu and Shein, has led to a significant reduction in their online advertising spending, impacting tech giants like Meta and Alphabet. President Donald Trump revoked the exemption that allowed goods made in China and Hong Kong valued at less than $800 to enter the United States without import taxes. This loophole had enabled Temu, Shein, and other low-cost online retailers to offer items at substantial discounts, driving billions of dollars in digital advertising and benefiting technology industry giants.

Now, these companies face tariffs as high as 145% on Chinese goods. Temu has already started adding "import charges" to certain products, more than doubling their prices, and has announced a shift to local warehouses in America for U.S. orders. Shein has not yet responded to requests for comment. These tariffs are expected to negatively affect companies built on low prices and aggressive online advertising.

The impact on advertising spending is already visible. Sky Canaves from eMarketer noted that ads from Temu and Shein were once unavoidable but have decreased significantly. Sensor Tower estimates indicate that Temu reduced its U.S. daily advertising spending on Facebook, Instagram, TikTok, Snap, X, and YouTube by 31% over a two-week period starting March 31, compared to the previous 30 days. Shein's daily advertising outlays on social networks in the U.S. were down 19% during the same period. Tinuiti research shows that Temu and Shein, once prominent on Google Shopping, virtually disappeared from the platform in April, correlating with the implementation of tariffs and subsequent price increases.

The reduced advertising presence has led to a decline in app downloads for Temu and Shein in the United States. Meta's CFO, Susan Li, mentioned that some Asian retailers have decreased their U.S. advertising spending in anticipation of the tariff changes, redirecting some spending to other markets. Advertisers from China, particularly Temu and Shein, had been among Meta's fastest-growing segments, generating $18.4 billion in revenue for Meta last year, which accounted for about 11% of its total revenue. Snap also reported spending cutbacks from a subset of advertisers due to the changes in the shipping loophole, leading to uncertainty and a subsequent drop in share prices. Google's chief business officer, Philipp Schindler, anticipates that the changes in the tariff loophole will create a slight headwind for Google's ads business in 2025, primarily affecting Asian e-commerce companies.