Temu parent PDD's stock tumbles as Trump tariffs close trade loophole

Core Viewpoint - The announcement of new tariffs by President Trump has negatively impacted shares of PDD Holdings, the parent company of Temu, due to the elimination of the "de minimis" trade loophole that allowed Chinese e-commerce companies to ship goods into the U.S. duty-free for packages valued under $800 [1][2]. Group 1: Tariff Implications - The new tariffs include a 25% levy on imports from Canada and Mexico, and an additional 10% on goods from China, with a temporary pause on tariffs for Mexico [1]. - The removal of the "de minimis" exemption is expected to challenge the pricing strategies of Temu and other Chinese e-commerce platforms, potentially affecting their growth in the U.S. market [2][4]. Group 2: Business Model Adjustments - Temu and Shein have established distribution centers in the U.S. to mitigate the impact of tariffs, aligning their logistics more closely with Amazon's extensive network [5]. - Despite these efforts, analysts at Citi suggest that the local warehouse program is still a minor part of Temu's overall business, which may not sufficiently cushion the effects of the tariff changes [6]. Group 3: Future Growth and Advertising Impact - Analysts estimate that the gross merchandise volume (GMV) from local warehouses could contribute over 20% to U.S. GMV by the end of 2024, but the new tariffs are likely to hinder growth beyond that point [7]. - The end of the "de minimis" exemption may also lead to reduced digital advertising spending by Temu and Shein, which have been significant contributors to Meta's advertising revenue [7][8].