It happened faster than anyone expected. One minute, you're scrolling through $3 smartwatches and $7 hoodies, and the next, the "de minimis" party in the U.S. just... stopped. Honestly, it's been a wild ride for Temu. If you've noticed your app feels a bit different or those "lightning deals" aren't hitting the same way, you aren't alone.
The numbers are pretty staggering. By May 2025, Temu saw its daily active users (DAUs) in the United States plummet by a massive 58%. We’re talking about a drop from roughly 70 million daily users down to under 30 million in just a few months. That’s not just a "dip"—it’s a crater.
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Why the De Minimis Loophole Changed Everything
Basically, for years, Temu (and its rival Shein) played the game on easy mode thanks to an old 1930s trade rule. This "de minimis" exemption allowed any package worth less than $800 to enter the U.S. duty-free. No taxes. Minimal paperwork. Just a straight shot from a factory in Guangzhou to a porch in Ohio.
But then the U.S. government stepped in.
Starting in early 2025, the Trump administration signed executive orders that effectively killed this loophole for Chinese imports. Suddenly, those tiny $5 packages were being hit with 30% customs fees, which eventually scaled even higher. By June 2025, some imports were facing tariffs as high as 54% or even flat fees per item.
The impact was instant.
- Prices went up: You can't absorb a 50% tax and keep selling $2 t-shirts.
- Shipping slowed down: Customs started inspecting everything to crack down on fentanyl precursors and forced labor concerns.
- The "Out of Stock" glitch: To avoid the tax, Temu started hiding products that ship directly from China from U.S. users.
The Strategy Shift: Temu Goes Local
Temu isn't just rolling over, though. They’ve pivoted to something they call the "half-custody" model. Kinda sounds like a legal term, right? In reality, it just means they are forcing sellers to store their goods in U.S. warehouses.
If you open the app now, you’ll see "Local Warehouse" or "Ships from US" badges everywhere. This is their attempt to survive. By shipping from within the States, they bypass the direct-to-consumer tariff issues at the border, but it comes at a price. Warehousing in the U.S. is expensive. Labor is expensive. Those costs are being passed straight to you, the shopper.
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A Tale of Two Retailers
Interestingly, Shein has handled the transition a bit better than Temu. While Temu's daily users fell by over 50%, Shein only saw about a 25% drop in the same period. Why? Experts think it's because Shein has more "brand loyalty." People go to Shein for specific fashion styles, whereas people went to Temu mostly because it was the absolute cheapest place on Earth. When the prices equalized with Amazon or Walmart, the "Temu magic" sorta faded.
The Ad Spend Ghost Town
You remember those Temu ads that were literally everywhere? They spent billions to "shop like a billionaire." Well, they've turned the faucet off.
In April and May of 2025, Temu reportedly slashed its U.S. advertising budget by nearly 95%. When you stop paying for the #1 spot on Google and Meta, your traffic vanishes. It seems the company realized that paying $40 in ads to acquire a customer who only buys a $10 taxed toaster wasn't great math anymore.
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What This Means for You (and Your Wallet)
Look, the era of "free" shipping and "dirt cheap" Chinese imports is basically over. If you're still using the app, you've probably noticed that the shipping minimums are higher and the "free gift" promos are way more restrictive.
What to expect moving forward:
- Price Parity: Expect Temu prices to look a lot more like Amazon's. The days of 90% discounts compared to local stores are mostly gone.
- Faster Shipping (Sometimes): Because more stuff is in U.S. warehouses, you might get your package in 3 days instead of 12. But the variety will be much smaller.
- Strict Compliance: Customs isn't playing around anymore. Packages are being scrutinized for safety standards and intellectual property.
Actionable Insights for the "Post-Loophole" World
If you're a regular shopper or a small business owner watching this unfold, here is how to navigate the new landscape:
- Compare the "Landed" Cost: Always check if the price on the screen includes the new "Processing Fees" or "Import Duties" at checkout. Some apps are adding these at the very last step.
- Watch the "Local" Badge: If you need something quickly and want to avoid potential customs delays, only buy items marked as "Local Fulfillment."
- Check the "Amazon Haul": Amazon launched its own discount section to compete with Temu, and because they already have the massive U.S. logistics network, they might actually be cheaper now for certain small gadgets.
- Diversify Your Sourcing: If you're a reseller who was relying on Temu, it's time to look at domestic wholesalers or different markets like Vietnam or India, which aren't facing the same level of tariff scrutiny—yet.
The "Temu Effect" hasn't disappeared, but it has definitely matured. The wild west of tax-free shipping is closed, and we're now seeing what these platforms look like when they have to play by the same rules as everyone else.