Temu's Viability in a Post-De Minimis Era: A Strategic Reassessment for Investors

The end of the de minimis exemption for U.S. imports in 2025 has marked a pivotal turning point for Temu, reshaping its business model and testing its long-term sustainability. Once a darling of the ultra-low-price e-commerce sector, Temu now faces a complex web of regulatory, logistical, and competitive challenges. For investors, the question is no longer whether Temu can grow, but whether it can adapt to a world where its core advantages-low-cost, direct-to-consumer imports-are increasingly constrained by tariffs and scrutiny.

Strategic Shifts in a Post-De Minimis World

The elimination of the $800 de minimis threshold in August 2025 forced Temu to abandon its reliance on low-cost, China-to-consumer parcel shipments, which now face full tariffs or flat fees. The platform's response has been a pivot to a domestic fulfillment model, including U.S.-based warehouses and local third-party sellers according to industry analysis. While this strategy mitigates some tariff impacts, it has also increased operational costs and eroded the price competitiveness that initially drove Temu's rapid growth.

By late 2025, Temu had redirected marketing and investment efforts to European markets such as France, Germany, and the UK, where de minimis exemptions remain in place. This geographic diversification has provided a temporary buffer, with European GMV growing by 80%-100% in 2025. However, the EU's accelerated timeline to eliminate its own de minimis threshold (€150) by 2026 threatens to replicate the U.S. scenario, forcing Temu to adopt similar costlier logistics strategies in Europe.

Financial Resilience Amid Tariff Pressures

Despite the upheaval, Temu's parent company, PDD Holdings, has shown resilience. Second-quarter 2025 adjusted earnings per ADS reached 22.07 Chinese yuan ($3.08), with revenue rising 7% year-over-year to CNY103.98 billion ($14.51 billion). This performance underscores the platform's ability to absorb short-term shocks through cost optimization and logistics innovation, such as the T01 customs clearance method for bulk imports and the B2B2C model.

However, the financial toll of the de minimis changes is evident. Monthly active users in the U.S. dropped 46% between April and June 2025, while Temu's net value score-a metric reflecting consumer satisfaction-declined as users grappled with higher prices and delivery delays. The company's pivot to a semi-managed supply model, which reduced total merchandise volume by 20%-30%, also highlights the fragility of its low-margin strategy.

Temu's position in the ultra-low-price e-commerce space is increasingly contested. Amazon Haul and Amazon Bazaar, leveraging Amazon's logistics infrastructure, offer faster delivery and more reliable returns. Meanwhile, AliExpress and SHEIN have strengthened their global supply chains and product offerings, with SHEIN excelling in fashion personalization. These competitors are addressing key pain points-such as shipping delays and product quality-that Temu has struggled to resolve post-de minimis.

The broader market is shifting toward platforms that balance affordability with reliability. For Temu, this means competing not just on price, but on supply chain transparency and customer trust-areas where its reliance on unverified Chinese suppliers has drawn regulatory ire according to sustainability reports.

Regulatory and ESG Risks

Temu's regulatory challenges extend beyond tariffs. In the EU, the platform was found in breach of the Digital Services Act for failing to prevent the sale of unsafe products, including toxic toys and non-compliant electronics according to EU findings. The European Commission has warned of potential fines up to 6% of global turnover according to official statements, while the U.S. Federal Trade Commission has raised concerns about data practices and ties to the Chinese Communist Party according to CSIS analysis.

These risks are compounded by evolving ESG standards. Temu's supply chain, characterized by high-volume, low-cost imports, faces scrutiny over labor conditions and environmental impacts. As global supply chains prioritize sustainability, Temu's opaque sourcing model could become a liability, particularly in markets like the EU, where the Carbon Border Adjustment Mechanism (CBAM) and EU Deforestation Regulation (EUDR) will impose stricter compliance requirements.

Long-Term Viability: Adaptation or Decline?

Temu's ability to endure in the post-de minimis era hinges on its capacity to adapt. The company has demonstrated agility in restructuring logistics and diversifying geographically, but these measures are not without limits. For instance, shifting to U.S. warehouses has reduced delivery times but increased costs, squeezing margins. Similarly, while European expansion offers growth, it also exposes Temu to regulatory environments that are increasingly hostile to its business model according to market analysis.

Investor sentiment is mixed. Morgan Stanley notes that Temu's U.S. demand has deteriorated, with daily active users halving in May 2025 compared to March. Yet the firm also projects U.S. GMV could reach $39 billion by 2030, assuming continued cost optimization according to market projections. This optimism is tempered by the reality that Temu's growth in non-U.S. markets-while robust-relies on less affluent regions where price sensitivity remains high according to market analysis.

Conclusion: A Calculated Bet for Investors

Temu's post-de minimis journey is a case study in the tension between disruptive innovation and regulatory reality. While the platform has shown resilience in the face of tariffs and competition, its long-term sustainability depends on navigating a landscape where cost advantages are eroding and compliance costs are rising. For investors, the key is to assess whether Temu's strategic shifts-domestic fulfillment, regional diversification, and supply chain optimization-are sufficient to offset these headwinds.

The answer may lie in Temu's ability to balance affordability with accountability. If the company can align its operations with evolving regulatory and ESG standards while maintaining its price edge, it may yet carve out a sustainable niche. But if it continues to prioritize speed and scale over compliance and transparency, the risks of regulatory penalties, reputational damage, and competitive displacement will grow. In a world where trade policies and consumer expectations are in flux, Temu's viability will ultimately be determined by its capacity to adapt-not just to tariffs, but to the broader forces reshaping global e-commerce.