Impact of Trump's Trade Policies: PDD Faces Challenges in Q1 Amidst Temu's Struggles

PDD Holdings,the parent institution behind the Chinese e-commerce site Temu,has recently reported a staggering 47% drop in profits for the first quarter of 2025. This decline is largely attributed to challenges in the U.S. market, exacerbated by ongoing trade tensions between China and the United States.

As stated by BBC News, PDD’s chairman Chen Lei highlighted a “significant shift in external policy environments” during an earnings call on May 27. The situation escalated when former President Trump eliminated duty-free exemptions for low-value packages from China on May 2, imposing a steep 120% tariff on Temu’s shipments to America.Although these tariffs were halved shortly after their introduction,Temu has pivoted its strategy by ceasing direct sales from China and now focuses solely on products shipped from U.S.-based warehouses.

In terms of financial performance, PDD reported revenues of 95.7 billion yuan (approximately $13.3 billion) for Q1—falling short of analysts’ expectations which had set projections at around 101.6 billion yuan. Additionally, their net income stood at just 14.7 billion yuan compared to an anticipated figure of 25.7 billion yuan.

To navigate these turbulent waters and maintain stability within its operations, Chen indicated that adjustments to their buisness model are necessary—changes that may impact profitability both now and into the foreseeable future.This includes reducing fees for merchants to enhance e-commerce activity and investing in local sourcing strategies for Temu as a safeguard against potential tariff fluctuations.