Temu's entire business model was built around a tariff exemption. The US ended it. The EU is threatening to do the same.

Temu's entire business model was built around a tariff exemption. The US ended it. The EU is threatening to do the same. Temu's whole business model was built on a tariff loophole that just closed, and now the EU's closing its version too. PDD's the Chinese parent behind Pinduoduo (domestic e-commerce) and Temu, the ultra-low-price app that expanded hard into the US, Europe, Latin America. Temu's edge was the de minimis exemption, packages under $800 entering the US duty-free, letting them ship straight from Chinese factories without the import tariffs a normal retailer would pay. That exemption's gone now. Q2 2026 shows the hit clearly: revenue grew only 8% YoY to RMB 112.4B, missing estimates of RMB 115.4B, net income fell 12% to RMB 27.2B (still beat lowered expectations). Operating expenses rose 13% as they pour money into marketing to defend growth against both the tariff change and brutal domestic price competition in China. EU's heading the same direction. Management flagged fresh margin pressure coming from new EU tariffs, one of the last big markets where the old duty-free model still worked. The EU also fined Temu over $230M for illegal products showing up on the platform. Their response is shifting to "local-to-local" fulfillment, building actual regional inventory and logistics instead of shipping direct from China, plus investing in helping Chinese manufacturers build their own brands rather than compete purely on price. Whether that preserves the margins that made Temu attractive in the first place is genuinely unresolved. Stock's down over 20% YTD, hit its 2026 low in June, though three-year returns are still up nearly 43%. Balance sheet's strong though, $67.3B in cash and short-term investments, real runway to absorb this. Real question: is Temu without the tariff advantage still the same growth story, or a fundamentally different, lower-margin business now. Anyone tracking how [PDD](https://www.stoxcraft.com/stocks/pdd) adapts to the post-de-minimis world?