30 KiB
| Tag | Date | DocType | Hierarchy | TimeStamp | Link | location | CollapseMetaTable | |||
|---|---|---|---|---|---|---|---|---|---|---|
|
2025-03-02 | WebClipping | 2025-03-02 | https://www.bloomberg.com/features/2025-temu-tariffs-trade-war/ | true |
Parent:: @News Read:: 2025-03-03
name Save
type command
action Save current file
id Save
^button-ChinaRetailGiantFacesNewTrumpTradeWarNSave
Temu: China Retail Giant Faces New Trump Trade War
Businessweek | The Big Take
How the world’s biggest online dollar store got sucked into Trump’s trade war.
By Bloomberg Businessweek
Illustration by Adam Ferriss
Jiaxing is a thriving manufacturing hub located near the mouth of the Yangtze River. Despite having a population twice the size of Chicago’s, the city isn’t well-known outside China, but people on the mainland recognize it as the town of scissors and blades. There are about 80 factories here specializing in hair clippers, pet-grooming equipment, sheep shears, kid-friendly scissors and the rest of the globe’s sharp-edged needs.
Inside a yellow-brick factory in the southern part of the city, Ma Da walks the floor, surveying machines as they spit out dozens of steel blades a minute. His company, Haining Yongfa Clipper Blade Co., has been making tools for salons and barbershops for almost 40 years. It had long sold its products to more recognizable razor brands that printed their names on the parts, but that began to change after Covid-19. “We saw this opportunity,” Ma says. It was a combination of two things. One was temporary: People were cutting hair at home and adopting new four-legged family members that needed to be groomed, so Ma started a consumer brand for the company’s products, KBDS, and added a line of pet clippers. The other big thing that happened was Temu.
In just two years, Temu has become the world’s biggest online dollar store. Its homepage perfectly captures the vibe. Visitors are bombarded with random items—faux-leather car seat covers, frog costumes for cats, knockoff handbags, supplements, whatever—and a flurry of banners, countdown timers and prize wheels hawking deals, price drops and limited-time offers.
Not content with simply making the stuff the rest of the world buys, China found in Temu an effective way to sell that stuff directly to consumers. In frenetic, candy-colored commercials aired during the 2023 and 2024 Super Bowls, Temu invited customers to “shop like a billionaire,” describing prices so low that anyone could buy as much as they wanted without thinking about it. And people do. With 50 million US shoppers a month, according to research firm Sensor Tower, it’s the biggest e-commerce app after Amazon. EMarketer Inc. estimates Temu will generate $30 billion in US sales this year, a milestone that took Amazon.com Inc. more than a decade to reach.
Temu isn’t a startup, though. Its parent company, PDD Holdings Inc., has been operating an online marketplace in China since 2015, periodically trading places in recent years with Alibaba Group Holding Ltd. as the country’s most valuable e-commerce business. Temu is the result of a careful study of American shopping habits and artificial intelligence systems for hyperpersonal product recommendations. To get the word out, PDD spent like a billionaire on ads and subsidies to bring down prices.
One other dynamic helped fuel Temu’s meteoric rise in the US: Donald Trump. The tariffs he imposed on China in his first term, most of which were retained by President Joe Biden, raised the cost of all manner of products. But Trump left untouched a near-century-old loophole that exempts international packages worth less than $800 apiece. That ability to ship items directly to the US duty-free is a big part of how Temu can undercut the prices of Amazon and just about everyone else. Instead of opening a bunch of warehouses near customers’ homes, Temu boxes up orders in China close to the factories where they’re made, loads them all onto cargo planes bound for major cities and gets them delivered right to customers’ doorsteps.
Biden pledged to eliminate the tax rule that makes this possible but never did. Trump has now taken up the cause. He ordered the loophole to be suspended as part of the tariffs he placed on China on Feb. 1, then backtracked days later when customs officers were unsure of how to handle the mountains of packages piling up at US airports. For now, Temu exists in a nervous limbo similar to the one the Chinese video app TikTok is in.
Temu’s continued prosperity isn’t up to Trump alone. Amazon and TikTok Shop are increasingly vying for the same budget-conscious shoppers, and Temu, while showing encouraging signs of customer retention, is still spending on marketing at a rate that may be difficult to sustain.
But at least for now, Temu is winning over more customers and sellers. Back at the blade factory, with the aroma of hot grease in the air, Ma explains that Yongfa started off selling on Amazon. But working with Amazon, he says, can be crushing. After manufacturing and packaging its products, Yongfa needs to box them all up, arrange their transport to the US and pay a tariff to unload at the port. Then it has to pay for the products to be shipped to Amazon warehouses across the country. The fees go on: advertising for visibility on Amazon.com, packaging and local shipping to customers, a penalty if warehouse stock isn’t replenished promptly, a penalty if inventory sits for too long, a 15% commission on every transaction. In all, Ma says, Amazon’s fees eat up at least half of each sale.
Selling on Temu is more straightforward. Yongfa ships its products to a nearby Temu warehouse in China, and that’s about it. Temu handles promotion, packs the blades when orders come in and ships them by plane to US airports for the final leg of delivery. Temu pays the seller a flat rate. There are few fees and no storefronts to set up or maintain. “We are not a professional e-commerce company,” Ma says. “Temu is an easier model for us.”
Here’s what that means for shoppers: A three-pack of detachable KBDS blades costs $70 on Amazon and $36 on Temu. Amazon’s customers will get their order in a day or two, whereas Temu’s will take 7 to 10 days. Either way, the factory pockets the same amount of money. Amazon’s 90% markup largely reflects the cost of fast delivery, which has long given the company its competitive edge. Temu is proving there’s another type of consumer out there.
To see Temu as a mere peddler of cheap products is to misunderstand the appeal of a dollar store. Besides the low prices, browsing the shelves can elicit the feeling of hunting for antiques at a flea market or discovering a rare gem at a record store. The goal isn’t necessarily to find something valuable but to find something interesting. That’s part of why Dollar General Corp. and Dollar Tree Inc. have more locations in the US than any other retailer.
Temu replicates the character of a neighborhood discount retailer, mixed with the aesthetic of the prize counter at a video arcade. The seemingly random assortment of products and the general appearance of disorganization is part of the point. It’s shopping for sport.
There’s another element of the Temu buying experience that you won’t get at a traditional dollar store. By the time an order arrives a week or more later, customers say they’ve often forgotten what they even bought. Tearing open the white-and-orange plastic bags or beat-up cardboard boxes can feel like unwrapping a little gift from your past self. This ritual has inspired an entire video genre on Instagram and TikTok known as the Temu haul, where customers record themselves opening their latest finds.
All that said, the low prices are a really important part of the equation. And for most of what Temu sells, those bargains wouldn’t be possible without the Tariff Act of 1930. Congress passed the law to protect American farmers and manufacturers from foreign competition while they struggled through the Great Depression. Eight years later, lawmakers realized customs agents were wasting time and irritating wealthy American travelers by taxing every souvenir brought home from overseas. So the US added the so-called de minimis rule. The Latin phrase refers to something of such marginal value that it’s considered insignificant. At the time, the limits were $1 for personal items and $5 for gifts mailed to the US from overseas.
Officials kept bumping up the numbers over the years to account for inflation while leaving the underlying rule undisturbed—ignoring vast changes in the scope of global commerce. Most of the world has versions of de minimis, but the US’s is the most generous. Barack Obama was the last president to increase the threshold, to $800 in 2016. In the UK it’s £135 ($170). During Trump’s first term, in which trade policy with China was one of his greatest fixations, the president never even mentioned de minimis.
By the time Biden was in office, Sun Qin was thinking a lot about the US. Sun, one of the founders of PDD, wears thick-rimmed glasses and is affectionately referred to around the office as Dada (sometimes Uncle Dada). When he helped start the Chinese e-commerce business a decade ago, investors were skeptical. Alibaba had a lock on the Chinese market, but Sun and his co-founders saw an opportunity with what the industry calls the forgotten consumer, the less affluent population in rural areas hungry for bargains.
The company’s namesake app, Pinduoduo, roughly translates as “come together, get more,” a reference to its early, Groupon-like offering. Pinduoduo now sells everything from groceries to appliances to furniture, with bargains still core to the experience. Customers can earn free vegetables and money to spend in the online store by playing games through the app, including one like FarmVille where players water trees and feed cows.
Sun thought there might be a forgotten consumer in the US, too. In early 2022 he traveled the country, getting a feel for the retail market and learning what American shoppers cared about. When he went back to China, he met with former executives at Alibaba and other companies that had tried unsuccessfully to crack the US, says a person familiar with the meetings who asked not to be identified because the discussions were private. Afterward, Sun exchanged notes with Gu Pingping, PDD’s chief operating officer and one of the most powerful women in Chinese tech.
They were keen to avoid the missteps made by Alibaba co-founder Jack Ma, who spent years loudly courting US officials, hoping to show them there was at least one person in China they could trust. In a 2017 meeting with President Trump, Ma promised to bring a million jobs to the US. Trump went ahead with his trade war anyway; the jobs never came; and Ma eventually found himself alienated from President Xi Jinping, who resented Ma’s growing public profile, and essentially went into hiding for years. PDD employees who previously worked for Alibaba shared their frustrations with Sun that Ma had wasted too much time and money in Washington.
Among Chinese businesspeople, Ma’s dizzying downfall reinforced an old proverb: The loudest bird atop the tree gets shot. Sun set out to be a quiet bird. Through a Temu spokesperson, he declined requests for an interview.
Within months of his US tour, Sun established a business in Delaware under the name Whaleco Inc. and opened a small office in Boston mostly for legal and accounting staff. An early employee says the group was initially told the company planned to expand the office, but that never happened. Most of the work was quietly sent back to China.
At its headquarters, PDD has a reputation for a bruising workplace culture. It goes by the mantra “11-11-6”—employees are expected to work from 11 a.m. to 11 p.m., six days a week. (And sometimes they’re asked to do overtime.) It’s a variation of the “996” regimen that Alibaba and other Chinese tech companies steered away from after a government crackdown. In 2018, Colin Huang, then the chief executive officer of PDD, pledged in a town hall meeting that employees would be able to start taking off entire weekends, according to two people who were there. The company still works weekends. “At Temu, working hours vary based on teams and the nature of their work, with flexibility to accommodate different starting and ending times,” says a spokesman for the company. “We prioritize fostering a supportive work environment that enables our teams to perform at their best.”
On a recent weekday morning in Shanghai, employees sprint from a subway station to arrive at the office before 11. Being just a few minutes late means the boss could dock your pay. That night, half the floors are still lit up close to midnight. Taxis line the curb waiting for stragglers to finish their shifts. The company’s Severance-like culture extends to an obsession with secrecy, say former employees who asked not to be identified because PDD has sued several ex-staff. Many employees don’t know their co-workers’ real names, because they all use aliases, often adopting the names of fruits or vegetables. (One executive goes by Potato.) The practice was inspired by Alibaba, where Ma and other management named themselves after characters from martial arts novels, arguing that aliases help flatten the corporate hierarchy. PDD’s higher-ups take things a step further by discouraging staff from connecting with colleagues on WeChat.
The company’s intense culture would become a big story in China. In 2020, PDD paid 3 billion yuan ($460 million) for the exclusive sponsorship rights to the national CCTV broadcast of the Spring Festival Gala, an annual celebration of the Lunar New Year and the most watched television program on Earth. Before the new year, though, a PDD employee collapsed after leaving work and died, an event that made national news and drew sharp scrutiny to the industry’s working conditions. PDD scrapped the CCTV deal under public pressure.
PDD arrived in the US in September 2022 with the introduction of Temu. (The name, pronounced “teh-moo,” comes from the phrase “team up, price down,” a corporate mutation of Pinduoduo’s original slogan.) It wasn’t long before PDD found the next big advertising opportunity—an event sometimes described in China as the “US Spring Festival Gala” and known in America as the Super Bowl. Temu’s first commercial aired a few months later, introducing the brand’s pastel orange boxes and low prices to millions of Americans. Two things that set Temu’s apart from other Super Bowl commercials were the comically low production values and the lack of a celebrity endorsement. The marketing team thought that curiosity would spark downloads and that celebrities were a waste, says a person familiar with the company’s strategy who requested anonymity because they weren’t authorized to discuss it publicly.
US retailers largely wrote off Temu at first, seeing it as a rehash of Wish, another would-be retail conqueror that came and went. (Wish also relied on cheap imports from China and flamed out after complaints of low quality and slow shipping—in some cases, as long as a month.) Sun, Temu’s president, recognized his service needed to deliver faster than Wish and get rid of shoddy products quickly to preserve its reputation. Shein, a Chinese fast-fashion retailer, offered a better model. Pronounced “she-in,” the company had figured out how to deliver clothing cheaply to the US in about a week, and American teen girls were going crazy for it. Temu opened warehouses in the Guangdong province, where much of the world’s clothing is made, and in Yiwu, a city defined by its plentiful supply of small commodities such as cheap jewelry and Christmas decorations. Sun read every customer complaint in Temu’s first year, says a person with knowledge of the habit who asked not to be identified because their conversations were private.
Temu bought even more Super Bowl ads last year. That helped cement the brand’s place in the zeitgeist, earning it a minute and a half of ridicule from Saturday Night Live. (The show proposed some new product taglines: “Not made with forced labor” and containing “minimal lead.”) Temu became the vehicle for PDD’s global ambitions, first in North America, Australia and New Zealand, then in Europe and finally to other parts of Asia, including Japan and the Philippines. Apple Inc. said Temu was the most downloaded iPhone app in two dozen countries in 2024. Sun had clearly found his forgotten consumer.
Alisha Sholtis was scrolling through Facebook one day when she saw an ad for a mini arcade claw game that dispenses candy and plastic figurines. She’d never heard of the app selling it, but $10 seemed like a good deal, so she downloaded Temu and placed an order. Some people might have reservations about punching their credit card number into a mystery app. Sholtis isn’t one of those people. “I’m a jump-in-first, ask-questions-later kind of person,” she says.
When the claw game finally arrived, Sholtis filmed her Temu haul and posted it to TikTok. It went viral, leading her to a career change and an addiction to impulse shopping. Sitting at her kitchen table in Davison, Michigan, an hour’s drive north of Detroit, Sholtis retraces her journey from nursing to social media influencing, charted through the piles of stuff she bought on Temu and filmed herself reviewing. Her videos get as many as 3 million views.
Sholtis, who’s 38, rummages through her house to fetch a Stanley Cup look-alike (brand: Meoky), children’s sneakers and a bouquet of fake flowers, all prized Temu acquisitions. She made a series of hit videos showing how you can find products listed on Amazon for a lot less on Temu. For another run of videos, she bought several phony handbags, including a knockoff Marc Jacobs tote and a fake Bogg bag for $20. “It’s the exact same thing,” she whispers. “There’s just no name on it.” She dismisses the idea that Temu and Shein are bad simply because they’re Chinese. “Some people are saying you shouldn’t shop on Temu, but Amazon is selling literally the exact same product for double or triple the price.”
That’s not exactly true. In numerous cases, Temu listings show photos that are identical to ones found on Amazon, with the same models striking the same poses, but offering products at a fraction of the cost. It turns out the items are often drastically different. Bloomberg Businessweek ordered hundreds of dollars’ worth of identically marketed blazers, shirts, sweaters and other apparel from both retailers and found that the Temu versions generally rely more on polyester and other cheap fabrics. An oversize women’s T-shirt from Amazon, with a mix of cotton, polyester and spandex, is soft to the touch, whereas its equivalent on Temu, all polyester and for half the price, feels like a youth soccer jersey.
The sheer volume of products available online today—some identical, others near-identical—has challenged the very notion of a counterfeit. Consider the case of Nicholas Widmann, a mechanical engineer who came up with a bird-beak-shaped device for shotgunning beers. The Krak’in Shotgun Tool, according to its marketing materials, is a safer way to pierce a can than using a house key or a tooth. Widmann started selling the Krak’in for $20 and was enjoying a moment in 2022 as spring breakers on sandy beaches posted videos of their exploits. Within a year, copycats showed up on Temu with a version that went for as little as $1.69. The TikTok videos suddenly shifted from happy testimonials to customers admitting they felt stupid for spending $20 on something they could get for a couple of bucks on Temu. Widmann sued the company—one of at least three dozen intellectual-property cases it’s faced in the US. In April 2024 the parties reached a settlement, the terms of which were undisclosed; they declined to comment on the case.
Temu says it has an automated system to flag possible counterfeits, has been hiring staff to manually review listings and introduced a dashboard in September 2023 for rights holders to submit and track claims. “Temu is deeply committed to protecting intellectual-property rights and ensuring a secure marketplace for both brands and consumers,” says the company spokesman.
Counterfeits have been a problem on the internet for a long time. Alibaba, Amazon, eBay and Wish each faced periods of scrutiny and took steps to appease brands and regulators, but knockoffs still find their way onto the sites. The scale of Temu’s growth threatens to make it a more insidious issue, but it’s not a new one, says Robert Freund, an e-commerce attorney in Los Angeles. “Temu is just one more place for it to happen on a large scale,” he says. Still, the European Union launched an investigation of Temu in October, and US lawmakers have cited Chinese-sold counterfeits as justification to revise the de minimis rule, though those efforts have stalled in Congress.
Amazon began taking Temu seriously enough that it went to work last year on a copycat called Haul. Tap a button in the Amazon app, and customers are transported to a store within the store, painted in purple and yellow neon with tickers advertising everything as 50% off. The selection is a familiar hodgepodge of sweaters, spatulas and scalp massagers. Many of the sellers are in China and ship their orders internationally using the de minimis exemption. But Haul can’t quite match the speed of Temu; shipments take one to two weeks to arrive.
Temu’s success isn’t an existential threat to Amazon. The pain has fallen most sharply on hobby shops, arts and craft stores and discounters such as Dollar General and Dollar Tree, according to research firm Earnest Analytics. Other US companies are looking to emulate some of Temu’s innovations, in particular by opening warehouses in China or Mexico to pack orders and send them individually into the US duty-free, says Derek Lossing, founder of the logistics consulting firm Cirrus Global Advisors. The effect would be eliminating US fulfillment jobs paying more than $20 an hour and replacing them with Chinese workers earning $5 an hour, similar to the offshoring that eroded the Rust Belt’s manufacturing base. “How else can you compete when people are buying two pairs of jeans for $13 shipped directly from China?” Lossing asks. “If you’re an American, there’s just no way to look at this without losing something.”
De minimis had always been a fringe issue before Temu and Shein. Kim Glas served in the Commerce Department under Obama and was appointed during the Biden administration to the US-China Economic and Security Review Commission, a 12-member panel that delivers annual reports to Congress about trade relations between the countries. In November the commission released an 800-page report detailing the threat Temu and similar marketplaces pose to US business and public safety. A key recommendation was to eliminate de minimis. “Without closing this loophole, further tariffs will only exacerbate the very problems Trump is trying to address,” says Glas, who’s also the president and CEO of the National Council of Textile Organizations, a trade group. “There will be an avalanche of packages from China the likes of which we’ve never seen before.”
The combination of Trump tariffs and pandemic-driven shifts in buying habits—both of which have proved to be lasting—sparked an explosion in the number of small parcels entering the US through de minimis. It went from 400 million in 2018 to 1.4 billion in 2024, with most coming from China. During that same time, the number of shipments entering the US through traditional channels grew less than 10%. “It’s become a trade nightmare,” Glas says. “It’s become a back door to avoid scrutiny, avoid compliance with consumer safety regulations and avoid tariffs.”
Sensing political danger, Temu has hedged. Starting late last year it’s been giving sellers the option to ship their own products and store them in warehouses they own or lease in the US, says the Temu spokesman. Temu is also contracting with logistics firms in the US to speed up delivery times and reduce the company’s reliance on de minimis. Now about half of all products Americans order on Temu come from warehouses within the country, according to another person familiar with the business. International growth has become especially important to Temu’s parent company as a Chinese economic downturn weighs on its domestic business. A revision to US trade policy would be devastating.
The most effective way to make a change would be for Congress to amend the law, but those efforts have never gotten far. Another approach is through regulation. In the twilight of the Biden administration, the White House proposed rules that would eliminate the tax loophole for tariffed goods and require shippers filing for a de minimis exemption to make additional disclosures. Customs and Border Protection formally kicked off the rulemaking process on Jan. 13, a week before Trump took office.
Trump, who has little patience for regulators, came up with a way to circumvent the minutiae. The tariffs he signed on Feb. 1 ordered the suspension of de minimis, citing fentanyl imports as the primary justification, though it will affect Temu all the same. By incorporating it into an executive order, Trump can implement the change more quickly than through regulators or Congress, but it’s more vulnerable to a legal challenge. Before it could get to that point, though, Trump reinstated the old de minimis policy to give officials time to prepare. His plan to impose duties on Canada and Mexico, which is also on hold, contains a similar de minimis provision.
A change to de minimis, like the tariffs themselves, is politically risky. They’ll both almost certainly raise prices on consumers. More than half of Americans are worried tariffs will drive up the cost of Chinese goods, and 42% are opposed to additional levies, according to a survey published Wednesday by marketing firm Omnisend. While Trump likes to be seen as tough on China, he also wants to keep his base happy, and there are a lot of Americans who just like a good deal, wherever they can find it.
Even Sholtis, for as much as she loves Temu, is occasionally conflicted. During an interview just after Election Day, a “Trump Vance 2024” sign was still planted on her front lawn. “I do feel kind of bad for ordering all of these dupes, because I do like to support American businesses a little more now,” she says. “Times are hard, man.” —Spencer Soper, Zheping Huang and Claire Che, with Luz Ding
(Updates with survey in the penultimate paragraph. A previous version of this story corrected a detail about Glas’ appointment to the commission.)
More On Bloomberg
$= dv.el('center', 'Source: ' + dv.current().Link + ', ' + dv.current().Date.toLocaleString("fr-FR"))