Temu (2022-2025): the PDD Holdings cross-border e-commerce launch that reached $70.8 billion GMV in 2024 — and the de-minimis-tariff-loophole closure that broke the business model

How Temu launched

PDD Holdings is the parent company of Pinduoduo (China’s third-largest e-commerce platform after Alibaba and JD.com). Pinduoduo was founded by Colin Huang in 2015 with a group-buying-and-social-commerce model targeting price-sensitive Chinese consumers. By 2020 Pinduoduo had over 800 million annual active users in China, making it one of the largest e-commerce platforms globally by user count. PDD Holdings’ strategic question through 2020-2022 was how to extend the Pinduoduo model internationally. Temu was the answer.

Temu launched in the US in September 2022 with a simple business proposition: low-priced goods (typically $5-30 per item, well below comparable Amazon prices) shipped directly from Chinese manufacturers to US consumers. The catalog spanned consumer-electronics-accessories, apparel, home goods, beauty products, toys, and adjacent categories. The marketing investment was substantial; Temu’s reported US marketing spend has been estimated at $1+ billion annually through 2023-2024. The combination of ultra-low prices, aggressive marketing, and gamified shopping experience (spinning wheels, time-limited deals, group-purchase mechanics) drove rapid US-consumer adoption.

The de minimis exemption and the business-model engine

Temu’s business model depended structurally on the US de minimis tariff exemption. The de minimis rule (Section 321 of the Tariff Act of 1930, modernized in 2016) allowed individual packages valued under $800 to enter the US duty-free and without typical customs inspection. The rule was originally designed for tourists bringing home souvenirs but had become the legal foundation for Temu and Shein’s direct-to-consumer Chinese-shipment business model. Almost every Temu and Shein order was individually under $800, so the orders entered the US duty-free.

The aggregate scale was substantial. Temu and Shein together imported approximately 600,000 packages per day to the US under the de minimis exemption by 2024. The total represented over 30% of all US de minimis imports. The cost advantage from avoiding tariffs (which would have added 15-30%+ to the imported goods’ costs depending on category) plus avoiding customs inspection (which added time and cost) was the principal economic advantage that supported Temu’s ultra-low prices. Without the de minimis exemption, Temu’s prices would have needed to rise materially to absorb the tariff costs, and the competitive advantage versus Amazon and other domestic-warehoused alternatives would have compressed substantially.

The 2025 de minimis closure and the business-model disruption

In August 2025 the Trump administration ended the de minimis exemption via executive order. The policy change was motivated by several factors: tariff-policy enforcement (the de minimis loophole had effectively neutralized the broader US tariff structure for low-value imports), forced-labor compliance (concerns that the de minimis exemption was allowing Xinjiang-cotton products to enter the US without adequate inspection), and protection of US-domestic retailers facing direct competition from de-minimis-advantaged Chinese imports. Forever 21’s March 2025 bankruptcy filing had explicitly named Temu and Shein as causes, citing the de minimis exemption.

The post-de-minimis Temu economics are substantially worse than the pre-closure model. Temu has been adapting through 2025 with several responses: increased fulfillment from US-warehouses to reduce cross-border-shipment friction, price increases to absorb some of the tariff costs, and reduced marketing spend as the underlying unit economics tightened. Whether Temu can sustain meaningful US market presence in the post-de-minimis environment is the principal strategic question through 2025-2026. The Chinese-direct-shipment business model that produced the 24,400%+ growth from 2022-2024 is structurally compromised; alternative business models with US-warehoused inventory or differentiated value propositions are required to sustain the business.

How RGM thinks about regulatory-loophole-dependent business models

When clients ask about business models that depend on specific regulatory features, the Temu case is the structural cautionary example. Three structural lessons. First, business models that depend on specific regulatory features face existential risk when the regulatory feature changes. Temu’s 24,400% GMV growth from 2022-2024 was structurally enabled by the de minimis exemption; the August 2025 closure of the exemption produced immediate business-model pressure. Companies building businesses on regulatory advantages should model the regulatory risk as a real and material business factor. Second, the regulatory feature that motivated the business model often had unintended-consequence dynamics that produced the eventual closure. The de minimis exemption was not designed to enable hundreds of thousands of daily cross-border-shipment packages; the actual use case exceeded what the policy was structured to support, which created political and regulatory pressure for closure. Companies operating under regulatory features should consider whether their use case is consistent with the policy intent or whether it exceeds policy boundaries in ways that produce closure pressure. Third, the strategic-pivot ability matters when regulatory features change. Temu has been adapting through 2025 with multiple responses (US-warehouse fulfillment, price increases, marketing-spend discipline). Whether the strategic-pivot is sufficient to maintain meaningful business position is contingent on execution quality and the durability of the underlying customer demand.

The pattern is generalizable to other regulatory-loophole-dependent business models. Examples include the cryptocurrency-trading business models that depend on specific regulatory treatment; the gig-economy classifications that depend on independent-contractor status; the digital-advertising business models that depend on specific privacy regulations; the various subscription-economy structures that depend on specific consumer-protection-law frameworks. We tell clients in regulatory-dependent business models to model the regulatory risk explicitly and to develop alternative-business-model contingency plans before the regulatory change forces them.

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