Shein and Temu are facing a steep drop in U.S. demand following the closure of the de minimis trade loophole, which previously allowed Chinese e-commerce platforms to flood the American market with low-cost goods without tariffs. Temu’s daily active users fell 52% between March and May, while Shein’s declined 25%, according to the latest data from Sensor Tower via CNBC.
The impact has been immediate. Temu’s monthly active users dropped 30%, with Shein seeing a 12% decline. Advertising budgets have been slashed, with Temu cutting spending by 95% year-over-year, while Shein reduced its marketing budget by 70%. The collapse in user engagement has pushed Temu’s app ranking from a top 3 position last year to 132nd place in May.
The loophole’s closure has forced both companies to rethink their logistics. Shein and Temu relied on drop shipping to send products directly from Chinese suppliers to U.S. consumers. The new tariffs have disrupted this model. Temu is now investing in a network of U.S. warehouses in an attempt to comply with new trade regulations, but scaling domestic distribution at the speed needed will be difficult.
The broader trade war between the U.S. and China is reshaping global e-commerce. The new tariff on former de minimis imports currently stands at 54%, down from an initial 120%, following a 90-day tariff truce between the two nations. Analysts believe that a 50% tariff is the tipping point where Temu loses its price advantage, putting its long-term viability in question.
While U.S. demand declines, Temu is shifting its focus overseas. 90% of its 405 million global monthly active users now come from outside the United States, with major growth in Europe, Latin America, and South America. The pivot suggests Chinese e-commerce firms are turning to less regulated markets.
The future of Shein and Temu in the U.S. remains uncertain. With tariffs increasing costs and American consumers pulling back, the ultra-low-cost model may no longer be sustainable. The next few months will reveal whether these platforms can adapt or if their presence in U.S. retail is coming to an end.
Sources:
https://www.usatoday.com/story/money/retail/2025/06/04/temu-user-base-plunges-tariffs/84028372007/
https://www.procapitas.com/news/economy/shein-and-temu-sales-plummet-as-us-closes-import-loophole