It’s safe to say that for U.S. households, 2025 has felt like a year of price creep.
Americans are paying more for virtually everything, as tariff costs ripple across the entire supply chain. In fact, analysts estimate that U.S. households are taking a $1,300 hit from a “hidden tax” due to President Trump’s tariffs.
💵💰Don’t miss the move: Subscribe to TheStreet’s free daily newsletter💰💵
In the midst of all this, though, American bargain shoppers just caught a major break. More importantly, that break isn’t coming from Walmart or Target, and certainly not from Amazon’s private labels.
Instead, it’s coming from an unexpected corner of the retail wars: Temu, which has thrived on undercutting everyone else.
Inside Temu’s discount machine
Temu, run by PDD Holdings (PDD) , is the dirt-cheap Chinese cross-border marketplace that’s most likely taken over your feed and your shopping cart.
Operating under its U.S. arm, Whaleco, the company has built a reputation for shipping rock-bottom priced, factory-to-consumer goods while keeping its users engaged through its relentlessly gamified app.
Related: Coca-Cola selling big coffee brand it bought to take on Starbucks
It stands apart for its ability to streamline the retail stack while banking on referral-driven mechanics to keep customer acquisition costs to a minimum. The result is that it has effectively managed to undercut its competition.
Also, in keeping deliveries quick in the shaky global trading environment, Temu has expanded its logistics control through a “fully managed” model.
It has also added new U.S. warehouses, while rolling out a local-seller program to complement cross-border shipments.
Zooming in on the numbers, PDD’s results continue to shine.
In Q2 2025, the company posted sales of RMB 103.98 billion (about $14.3 billion), jumping 7% year-over-year and beating analyst estimates in the process.
Related: Starbucks’ behind-the-scenes shift hints at brewing struggles
Nonetheless, its margins came under duress as competition stiffened and logistics costs shot up.
For perspective, PDD doesn’t break out Temu’s sales separately, but its results last year show it posted RMB 393.8 billion (about $54 billion), up a whopping 59% year-over-year.
For U.S. shoppers, Temu is operating under a fully managed shipping model, with delivery routes shifting between direct parcels and domestic inventory, depending on policy.
A fragile tariff truce hands Temu’s U.S. shoppers rare relief
Temu’s U.S. customers just caught a much-needed break in the Trump-led tariff storm.
After a tentative truce between Washington and Beijing, the bargain eCommerce player will again be able to directly ship from Chinese factories to American doorsteps.
Related: Top analyst resets Nvidia price target for surprising reason before earnings
U.S. shoppers, who feared their $3 kitchen gadgets or $5 fashion finds were gone for good, can take a much-needed breather.
The pause comes after President Donald Trump retracted some of the more punishing tariffs on Chinese goods.
His April order effectively scrapped the “de minimis” exemption, enabling duty-free imports under $800, which hit retailers like Temu especially hard.
Duties of over 100% threatened to erode almost the entire cost advantage for Temu and its competition. By July, however, the U.S. lowered the extra tariffs to 30% for 90 days and trimmed small-package rates to 54%. That small window gave Temu room to reboot.
More News:
- Billionaire George Soros supercharges Nvidia stake, loads up on AI plays
- Tesla just got its biggest break yet in the robotaxi wars with a key permit
- Bank of America drops shocking price target on hot weight-loss stock post-earnings
Suppliers feel that the new development has reinvigorated their “fully managed” logistics setups, betting that price-sensitive Americans will stick with Temu despite the political headwinds.
Also, in a big win for American shoppers, they have regained access to Temu’s ultra-cheap marketplace, giving stalwarts like Amazon a run for their money.
Tariff reprieve sharpens Temu’s edge
Temu’s break from tariffs is arguably a power move in the discount wars.
While its peers raise prices, Temu is doubling down on cheaper and quicker deliveries, and the Washington-Beijing truce gives it the impetus to hit even harder.
It’s important to note that the U.S. Customs and Border Protection is currently processing an estimated 3.8 million de minimis parcels per day (roughly 92% of all cargo entries), so a resumption immediately scales Temu’s reach.
As we look ahead, we’re likely to see Temu trim intermediaries and prices, while its peers struggle with higher freight and tariff costs.
According to the Tax Foundation, the read-through for Walmart, Target, and Amazon is feeling the squeeze where it hurts the most, as customers feel the heat from Trump tariffs.
