Online shopping giant Temu, owned by PDD Holdings Inc., is making significant changes to its supply chain in response to new tariffs imposed by President Donald Trump, a shift that may lead to increased prices on the popular budget shopping platform.
Temu is moving away from its original business model, where the company handled price-setting, shipping, and marketing, and instead is adopting a “half-custody” framework. Under this model, factories will send their products in bulk to U.S. warehouses, while Temu only manages the online marketplace. People familiar with the shift said that though the change is not yet mandatory, the company has indicated it will prioritize sellers who adopt the new approach.
The move could lead to higher costs for Temu customers, as merchants lose the shipping economies that Temu previously provided. Additionally, sellers will now have to cover increased delivery costs due to the U.S. tariffs. By distancing itself from the logistics model pioneered by Amazon, which controls its delivery network, Temu faces challenges as it navigates these new operational costs.
This shift comes as China-based e-commerce platforms, including Temu and rival Shein, brace for the eventual end of the “de minimis” rule, which currently allows small parcels valued under $800 to enter the U.S. duty-free. Although the policy change has been delayed, it will likely impact the majority of products sold by these companies. Bloomberg Intelligence analysts noted that PDD and other Chinese e-commerce giants might face steeper losses or lower profits due to the new tariffs, even after Trump postponed removing the duty-free exemption for small parcels.
Temu’s move to the “half-custody” model, which began early last year, has accelerated since Trump’s rise to power. The company’s transition could also result in fewer Chinese suppliers on the platform, particularly smaller merchants who struggle with managing logistics or securing favorable shipping rates.
In response to the looming tariff changes, Shein is asking some of its Chinese suppliers to build new production capacity in Vietnam, offering incentives like higher procurement pricing. This shift is an attempt to maintain its ability to deliver small parcels to the U.S. without incurring additional duties.
The broader impact of these changes is becoming evident, with companies such as Temu and Shein having shipped an estimated $46 billion worth of small parcels to the U.S. last year. The expiration of the de minimis rule will affect a significant portion of their U.S. sales, forcing them to adapt to the evolving geopolitical landscape and shifting tariff policies.
Representatives for Temu did not respond to requests for comment on the company’s latest supply chain adjustments.
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