Vulnerability sales nearly a decade ago expanded shipments with tariff-free goods, which caused Temu, Shein and other low-cost online retailers to deliver goods from factories in China at incredible discounts.
It also frees up something else – a multi-billion dollar digital advertising cascade that provides surprises for Meta, Alphabet and other tech industry giants. Temu and Shein worked hard to attract the attention of American shoppers, seemingly covering every inch of the internet with ads. Only Amazon spent more on online advertising in the U.S. than Shein or Temu.
Now, after the demise of the transport loophole that stimulated it, the advertising Monopoly may be about to end.
On Friday, President Trump lifted exemptions that allowed goods produced in mainland China and Hong Kong's estimated price of less than $800 without import taxes. For Temu and Shein, that means they now have to bear up to 145% tariffs to bring Chinese goods. Last week, Temu began adding “import fees” to certain products, which doubled the total price of goods purchased and shipped.
A TEMU spokesman said Friday that the company has shipped its products directly from China to its customers in the U.S. and will now ship from local warehouses in the U.S. as the business “transitions to local fulfillment model.” Shein did not immediately respond to an email requesting a comment.
The new tariffs are expected to hit punitively for companies based on selling goods at rock prices and attract customers through active online advertising.
Temu used the slogan “Shop like a billionaire” to buy ad time during the Super Bowl.
Temu's parent company PDD Holdings uses a similar strategy on China's Chinese e-commerce app Pinduoduo, spending a lot of money on advertising and growing rapidly in a competitive market.
Sky Canaves, chief retail and e-commerce analyst at research firm Emarketer, said Temu and Shein's ads were once “inevitable” on searches, social media and apps. But that is changing.
“They have shrunk the ads a lot,” she said.
Starting March 31, Temu spent less on daily advertising in the U.S. on Facebook, Instagram, Tiktok, Snap, X and YouTube than the average daily spending in the first 30 days, according to market intelligence company Sensor Tower. Shein's daily advertising performance on its social networks fell by 19% in the same week or two.
Temu and Shein flooded Google with ads selling items in the U.S. and began disappearing from the platform in April. Temu accounted for 19% of all ads in Google Shopping on April 5, but the figure fell to zero a week later, according to research by marketing company Tinuiti. By April 16 to April 16, Shein fell to zero from 20% in early April.
Tinuiti identified tariffs as the main factor in advertising pullbacks. It said the reduction in spending coincided with the increase in price on certain products by the two companies.
Without constant advertising image, Temu and Shein's apps are separated from the charts of the most downloaded mobile apps in the United States. The company disclosed in a 2023 lawsuit against Shein that Temu serves approximately 30 million users in the United States.
In Meta, which owns Facebook, Instagram and WhatsApp, some Asian retailers have already reduced their U.S. advertising spending when they expect the so-called De Minimis waiver, Meta chief financial officer Susan Li said on a conference call with investors on Wednesday. Some of these spending has redirected it to metaplatforms in other markets, but April was down from a year ago, she said. Ms. Li did not name any company.
Investors are paying close attention to what Mehta said, as advertisers from China (Chinese advertisers by Temu and Shein) have been one of the company's fastest-growing market segments. Last year, advertisers from China generated $18.4 billion in revenue for Meta, more than doubled their total since 2022.
“Part of advertisers” has reduced spending due to changes in shipping vulnerabilities,” social media company Snap said. The company declined to provide current quarterly forecasts, citing uncertainty caused by tariffs. Snap's stock fell 12% after the announcement.
Last week, Google's chief business officer Philipp Schindler said the change in tariff vulnerabilities “apparently will create huge resistance to our advertising business in 2025”, mainly from Asian e-commerce companies. He also did not identify a specific company.
