Customer engagement with the hit shopping app Temu has "declined significantly" in the face of President Donald Trump's 145% tariffs on Chinese goods, analysts with Morgan Stanley said Wednesday. Parent company PDD Holdings stock was lower Wednesday as investors scrutinized how the tariffs will hit PDD's Amazon-challenging Temu business.
Morgan Stanley based its analysis on survey data that found customers shopping less often with the discount-focused Temu. In the weeks since Trump announced his tariff plan, Temu has cut back on U.S. advertising spending and posted a notice to customers that it would raise prices. Along with broad 145% levies on China import, Trump closed a U.S. trade exemption that allowed e-commerce platforms like Temu and Shein to ship packages directly to Americans from China duty-free. The so-called de minimis exemption does not apply to packages from China and Hong Kong as of May 2.
"With the removal of the de minimis exemption and the addition of 145% tariffs, engagement with the platform has declined significantly," a team of Morgan Stanley analysts led by Simeon Gutman wrote to clients Wednesday. "While the tariff environment is uncertain, if the status-quo remains for an extended period, we believe Temu's competitive threat will continue to weaken."
Temu And Tariffs
About 19% of the roughly 2,000 U.S. consumers polled in late April said they had shopped at Temu in the past three months, according to the Morgan Stanley research team. That was down from a high of 27% in September 2023.
Launched late in 2022, Temu rocketed to the top of U.S. app download charts in 2023 and for much of last year. PDD spent big on advertising, including for ads in back-to-back Super Bowls. Temu's advertising focused on its ultra low prices, helped by a model that allows Chinese merchants to send products directly to consumer's doorsteps in dozens of countries. While PDD's bigger business is the China-focused Pinduoduo e-commerce platform, Temu helped fuel a rally for PDD stock in 2023.
Temu had prepared for a de minimis crackdown. It has opened U.S. warehouses and recruited local sellers. The Wall Street Journal reported last week that Temu would no longer ship directly to customers from China, focusing instead on its local logistics operations. It remains to be seen whether Temu can maintain its price advantage over Amazon and others with the shift.
In the meantime, interest from U.S. shoppers appears to be fading. Total downloads fell 73% in the last week of April compared to the final week of March, Morgan Stanley noted. Weekly active users fell 43% over the same period, according to the analysts' estimates.
"The decline in WAUs (weekly active users) demonstrates that the de minimis exemption removal is leading to meaningful churn of the existing base on top of the reduced user acquisition," Gutman wrote.
While Temu is often described as an Amazon challenger in the U.S. Gutman noted that brands such as Ross Stores and Burlington Stores have greater customer overlap with Temu.
PDD Stock: Tariff Warning
Meanwhile, PDD stock was down 2.3% at 108.76 on the stock market today. Shares are ahead 12% overall this year but off about 18% from 2025 highs reached in mid March.
The Morgan Stanley report does not offer a view of PDD stock directly. Morgan Stanley's China-focused internet analyst team expects Temu to achieve profitability this year, Gutman noted.
PDD is expected to report first quarter earning later this month, though it has not announced an official date.
In an annual investor report filed with U.S. regulators on April 29, PDD included tariffs as a risk factor for its U.S.-listed shares.
"As our business model involves cross-border trade, these tariff measures may increase import costs for goods sold through our platforms," PDD's annual report said. "Such cost increases are expected to result in reduced sales volumes or higher consumer prices on our platforms, which could adversely affect our competitiveness, business, financial condition or operating results. Global trade tensions have intensified and may escalate even further, which may affect global trade and economic conditions."
