Nearly a decade ago, the expansion of a tariff-free shipping exemption paved the way for online retailers like Temu and Shein to offer products directly from Chinese factories at drastically reduced prices.
This exemption also triggered an explosion in digital advertising spending, creating a lucrative market for technology giants such as Meta and Alphabet. Competing to capture American consumers' attention, Temu and Shein saturated the internet with advertisements. In recent years, only Amazon has outspent them on online ads in the United States.
However, this advertising boom is now facing a sharp decline following the removal of the tariff exemption that initially fueled it.
Last Friday, the exemption allowing shipments valued under $800 from mainland China and Hong Kong to enter the U.S. without import taxes was revoked. As a result, Temu and Shein now face tariffs as high as 145 percent on Chinese goods. Temu recently began applying 'import charges' on select products, which in some cases have more than doubled the total cost for buyers.
A Temu spokesperson confirmed that the company has ceased direct shipments from China to U.S. customers, shifting to fulfill orders from domestic warehouses as part of a transition to a local distribution model. Shein did not immediately provide a response to requests for comment.
These new tariffs are anticipated to significantly disrupt businesses that rely on ultra-low pricing and aggressive online marketing strategies.
