Temu of PDD Holdings (PDD, Financial) and Shein—once hailed as viral e-commerce sensations—are watching their U.S. momentum evaporate. Monthly active users on Temu's app plunged 51% to 40.2 million between March and June, while Shein dropped 12% to 41.4 million, according to Sensor Tower. What happened? A political sledgehammer. President Donald Trump scrapped the “de minimis” tax exemption in May, labeling it a “big scam.” That single move slapped parcels under $800 with tariffs as high as 90%, later dialed down to 30% during negotiations. It hit their low-cost import strategy where it hurt most.
Temu has been racing to reinvent itself—shifting fulfillment to U.S.-based sellers instead of Chinese warehouses. Meanwhile, Shein's IPO hopes in the U.S. and U.K. fizzled, and it's now pivoting toward a potential listing in Hong Kong. But the pain goes beyond shipping. Both companies have sharply pulled back on U.S. ad spend: Temu slashed it by 87%, Shein by 69%. That drop-off in visibility is showing in engagement. Just last year, they were top-15 digital advertisers in the U.S. Now they don't even crack the top 60.
So where next? Europe—at least for now. Temu's usage in France, Spain, and Germany has surged over 60% year-on-year. Shein is growing too, with double-digit user gains across the U.K., Germany, and France. But that runway could shorten fast. The EU is preparing a €2 import fee on small parcels, and the U.K. is mulling over its own exemption rollback. If that happens, the same pressures suffocating their U.S. growth could follow them across the Atlantic. The playbook that worked yesterday might already be out of date.
