US shoppers ditch Shein and Temu as Trump closes tax loophole

Unlock the Editor’s Digest for free

Online retailers Temu and Shein have seen their once rapid user growth go into reverse in the US after President Donald Trump imposed steep tariffs on Chinese goods and closed a tax loophole that allowed them to undercut rivals.

Temu’s monthly active users, a measure of engagement on its app, plunged by 51 per cent to 40.2mn in the US between March and June, according to data from market intelligence firm Sensor Tower.

The number of US shoppers using Shein’s app also shrank over the same period, albeit not as drastically. The fast-fashion retailer saw a 12 per cent drop in monthly active users to 41.4mn, according to Sensor Tower.

Shein and Temu pioneered a new model of ecommerce that has disrupted the retail industry across the western world over the past five years.

They both escaped import duties by sending Chinese-made goods directly to consumers’ homes as individual packages. Cheap prices and a social media advertising blitz enabled Shein and Temu to amass a vast customer base in a matter of months.

Shein sought to capitalise on its growth with a stock market float but struggled to win the backing of regulators for a listing in the US and the UK.

Reuters reported last week that Shein imminently plans to file for an IPO in Hong Kong. Shein declined to comment on its listing plans or business performance.

On May 2, Trump scrapped the low-value goods exemption in the US, known as “de minimis”, for parcels arriving from China and Hong Kong, calling it “a big scam going on against our country”.

The president replaced the exemption, which allowed parcels worth less than $800 to enter the US duty free, and replaced it with a 90 per cent tariff. That was subsequently reduced to as little as 30 per cent as part of a wider de-escalation of trade tensions with China.

In the aftermath of Trump’s policy changes Temu overhauled its business model in the US. Instead of shipping products from factories in China it began shipping orders from sellers based in the US.

The drop in usage of Temu and Shein may also be tied to a decline in each company’s advertising spending. Over the past three months Temu’s US ad spending fell by 87 per cent and Shein’s dropped by 69 per cent compared with the same period last year, according to Sensor Tower.

Last year they ranked as the 10th and 11th-largest digital advertisers in the US — they now rank outside the top 60, the researcher said.

As the environment in the US has become more hostile, Temu and Shein have switched their focus to Europe.

The number of people using Temu’s app in June jumped by 76 per cent in France, 71 per cent in Spain and 64 per cent in Germany, compared with the same period last year, according to Sensor Tower. Meanwhile, Shein’s monthly active users rose between 13 per cent and 20 per cent in the UK, Germany and France.

But growth in Europe could also be at risk as the EU plans to levy a €2 fee on small packages entering the bloc, and the UK government is considering ending its own import duty exemption scheme.

Temu declined to comment on business metrics or ad spending, but said its focus was on “working with merchants across regions”.

“Since fully opening our marketplace to local sellers in over 20 markets . . . we’ve been helping them expand their reach and grow their businesses.”