U.S. Market Position Shaken by Trump Tariffs
Push to Secure Local Sellers Meets Resistance
Business Model Hit, Temu Scrambles to Diversify Global Markets

The fallout from former President Donald Trump’s tariff policies is undermining the U.S. market position of Chinese e-commerce platform Temu, which is now struggling to secure domestic sellers. Amazon’s dominance in online retail and its aggressive pricing strategy are stymieing Temu’s expansion, as trade tensions between the U.S. and China intensify. In response, Temu is increasingly turning its attention to alternative markets outside the U.S., including the Middle East, Asia, and Latin America, in a bid to diversify its business portfolio.

Temu Offers Incentives to Attract U.S. Sellers

On July 28 (local time), the Financial Times reported, citing sources familiar with the matter, that “Temu has been told by U.S. businesses and sellers that it cannot offer branded products at lower prices than Amazon.” Temu has been significantly impacted by the high tariffs imposed under the Trump administration. In May, the administration scrapped the de minimis rule that had exempted imports valued under $800 from tariffs. For Temu, which relies on importing low-cost goods from China, this has created a major obstacle to stocking products on its platform.

As a result, Temu’s footing in the U.S. market is weakening. According to market research firm Sensor Tower, Temu’s monthly active users (MAUs) in the U.S. dropped by 54% to 37 million as of mid-July, compared to March. The drop appears linked to Temu’s pause in advertising, though it resumed ad campaigns last month.

Facing difficulties in importing cheap goods from China, Temu has turned to securing a new supply chain within the U.S. The company has reportedly begun offering incentives such as lower commission fees to retailers, encouraging them to list their products on the platform. Previously, Temu had distributed low-cost Chinese goods duty-free, but with the revised tariff policy making that model unsustainable, it is now seeking to partner with local brands and sellers.

U.S. Sellers Say “Cannot Undercut Amazon”

However, Amazon’s pricing strategy has become a significant barrier. Leveraging its massive scale, Amazon is able to absorb losses over time and enforce a lowest-price policy on most items. If a retailer sells an identical product for less on Temu, continuing business with Amazon—America’s largest online marketplace—becomes difficult. One major seller said, “You can’t sell the same product on Temu for less than on Amazon,” adding that only different products might qualify for listing. Another seller commented, “Temu offered incentives like commission cuts to lure us, but warned that Amazon would immediately match the price.”

On Temu, it is the platform—not individual sellers—that sets product prices. Thus, once a distributor begins supplying products to Temu, they have no control over whether the listed price will undercut Amazon’s. This makes competing with Amazon’s pricing very risky for sellers. Amazon, through its “Buy Box” policy, gives priority visibility to the lowest-priced items. If a brand or seller offers lower prices elsewhere, Amazon can limit that product’s exposure. While Amazon stated that “selling partners independently determine prices and inventory,” it also emphasized that “offering customers competitive pricing is a top priority.”

An executive from a large supplier noted, “Since we can’t offer the same product at a lower price than on Amazon, we have no choice but to offer entirely different products to Temu.” Martin Heubel, a consultant who brokers deals between Amazon and retailers, warned, “Unless Temu is willing to absorb billions of dollars in annual losses for the next five years to grow market share, it will need to act much more strategically.”

Expansion into Middle East and Latin America

Having suffered a blow to its original business model, Temu is now overhauling its sales approach. A spokesperson for the company stated, “We are recruiting local sellers in over 20 countries, including the U.S., Canada, U.K., Germany, Japan, and Australia. Our focus is on increasing consumer access to affordable, high-quality goods while helping regional businesses reach more customers through our platform.” According to the South China Morning Post, Temu advised over 1,000 Chinese sellers during a May briefing in Guangzhou to look toward international markets beyond the U.S.

Internally, Temu is also exploring ways to continue selling Chinese products in the U.S. On its website, Chinese goods stored at U.S. facilities are being labeled as domestically sourced. In April, the company introduced a new business model called “Y2.” Under this model, Chinese sellers are required to send just one item to designated warehouses in the U.S., with Temu managing local logistics.

This is a variant of the existing “semi-consignment” model, offering an advantage over previous methods that required bulk shipments. However, sellers using the Y2 model have pointed out that it typically extends delivery times to 14 days, reducing competitiveness in time-sensitive markets. One seller, who previously used Temu’s “full consignment” model to sell women’s apparel, said, “I have no plans to adopt Y2—it’s merely a temporary fix.”