Nearly a decade ago, with the growing loopholes for tariff-free goods freight, Temu, Shein and other low-cost online retailers have been offering items directly from Chinese factories at immeasurable discounts.
And I also unleashed something else. It's a multi-billion dollar digital ad that has provided pimples to meta, alphabet and other tech giants. Temu and Shein are joking with the attention of American shoppers, wrapping every inch of the internet with ads. Over the past two years, only Amazon has spent more on online ads in the US than Shein or Temu.
Now the Bonanza of the ad may be nearing the end after the end of the ship's loophole that drove it.
On Friday, President Trump eliminated the exemption that allowed goods made in mainland China and Hong Kong to enter the United States without being subject to import taxes. For Temu and Shein, this means that they are currently subject to up to 145% tariffs to bring in Chinese goods. Last week, Temu began adding “import fees” to certain products. This has more than doubled the overall price, and I bought and shipped the item.
A Temu spokesman said Friday that the company will suspend direct shipments of products from China to US customers and that the US order will be shipped from local US warehouses as the business “migrates to a local fulfillment model.” Shein did not immediately respond to emails requesting comment.
The new tariffs are expected to punish a company that is built on selling goods at rock bottom prices and attracting customers through aggressive online advertising.
Using the slogan “Shopping Like a Billionaire,” Temu bought advertising time during the Super Bowl.
Temu's parent company, PDD Holdings, used a similar strategy on Pinduoduo, a Chinese e-commerce app, and spent lavishly on advertising to grow rapidly in a competitive market.
Sky Canaves, a leading retail and e-commerce analyst at research firm Emarketer, said Temu and Shein ads were once “inevitable” on search, social media and apps. But that's changing.
“They've already pulled the ads back pretty badly,” she said.
Over the two weeks starting March 31, Temu spent 31% less on daily ads on Facebook, Instagram, Tiktok, Snap, X and YouTube, and spent average daily spending on the platform over the past 30 days. Shein's daily ad spending on US social networks fell 19% over the same two weeks.
Temu and Shein were flooded with ads for products sold to Google in the US, but began to disappear from the platform in April. On April 5, TEMU accounted for 19% of all US ads displayed on Google Shopping, but that figure fell to zero a week later, according to a survey by marketing company Tinuiti. By April 16th, Shein had dropped to zero from 20% in early April.
Tinuiti has identified tariffs as the main factor behind the ad pullbacks. He said the spending cuts coincided with price increases by both companies for certain products.
Without the presence of constant ads, the Temu and Shein apps have fallen from the charts of the 10 most downloaded mobile apps in the US. Temu disclosed it in a 2023 lawsuit filed against Shein as it served approximately 30 million users every day in the United States.
At Meta, which owns Facebook, Instagram and WhatsApp, some Asian retailers have already cut US advertising spending in anticipation of the so-called De Minimis exemption end, Meta's chief financial officer Susan Li said in a conference call with investors on Wednesday. Although some of the spending has been redirected to other market meta platforms, she said spending in April has declined from a year ago. Li didn't name the company.
Investors were closely watching what Meta said, as Chinese advertisers led by Temu and Shein were one of the company's fastest-growing segments. Last year, Chinese advertisers generated $18.4 billion in revenue for Meta, which has more than doubled in size, about 11% of the total since 2022.
Social media company Snap said a “subset of advertisers” cut spending due to changes in transport loopholes. The company refused to provide forecasts for the current quarter, citing the uncertainty caused by tariffs. Snap's shares fell 12% since the announcement.
Last week, Google CEO Philip Schindler said that changing tariff loopholes would “evidently cause slight headwinds in the advertising business in 2025” mainly from Asian e-commerce companies. He also did not identify any particular companies.
