Policy Impact - The U.S. has officially removed the tariff exemption for small packages from China, replacing it with import fees up to 145% starting May 2, 2023, with further increases planned [1][3] - This policy significantly affects Chinese e-commerce platform Temu, which previously thrived on low-cost shipping, leading to a drastic increase in consumer costs for Chinese goods by 130%-150% [3][4] Company Response - In response to the tariff pressure, Temu announced on May 3, 2023, that it would cease all direct shipments from China to the U.S., shifting to a model where all orders are fulfilled by local U.S. sellers [4][5] - The platform has marked all direct shipment items as "out of stock" and is focusing on a localized supply chain to eliminate import fees and additional shipping costs [5] Consumer and Seller Impact - The new tariffs are expected to disproportionately affect low-income American households, with 60% of Temu's users earning less than $50,000 annually, leading to a significant increase in living costs [6][7] - Over half of the small Chinese sellers relying on the previous tariff exemption are likely to exit the market due to increased costs, with some sellers facing profit margin squeezes of 26%-150% [7][8] Industry Dynamics - Other platforms like Shein and AliExpress are also adjusting their pricing strategies in response to the new tariffs, with Shein increasing prices by 51% and Amazon's low-cost platform Haul ceasing to display tariff costs [8] - The average cost of goods has risen from $12.5 to $14.9, a 19.2% increase, while logistics costs have surged from 15% to 22% of total costs, a 46.7% rise [8] Future Strategies - Temu is accelerating the recruitment of U.S. small sellers and has established inventory centers in the U.S. to replace the direct shipment model from China [9][10] - The company is also exploring new markets in Brazil, Mexico, and Nigeria to diversify its risk amid tightening U.S. policies [9][10] - Compliance measures are being enhanced globally, with Temu requiring sellers to meet local regulations and certifications to navigate international trade challenges [10] Conclusion - The changes in U.S. tariff policy highlight the harsh realities of global trade, pushing companies to shift from aggressive pricing strategies to more sustainable practices focused on localization, compliance, and market diversification [11][13]