Two of China’s fastest-growing e-commerce players are dialing back their U.S. expansion strategies as tariffs and trade restrictions reshape the competitive landscape.

Temu and Shein, whose ultra-low prices and aggressive digital marketing campaigns have challenged industry incumbents like Amazon, have significantly cut U.S. advertising spending and notified customers of upcoming price increases - amid mounting pressure from President Donald Trump’s recent tariff hikes on Chinese goods.

According to data from analytics firm Sensor Tower, Temu cut its average daily advertising spend on platforms including Meta, X (formerly Twitter), and YouTube by 31% in the two weeks leading up to April 13. Shein’s spending fell by 19% over the same period. Temu also eliminated its entire U.S. spend on Google Shopping as of April 9, the day new tariffs on Chinese goods were introduced.

The two companies sent near-identical emails to U.S. customers this week citing “global trade rules and tariffs” as drivers of higher operating expenses and warning that “price adjustments” will begin on April 25.

The pullback underscores how Trump’s revived trade confrontation with China, which includes ending the de minimis exemption that allowed duty-free imports under $800 - is reverberating across the U.S. consumer and tech sectors. The new rules, set to take effect May 2, impose tariffs of up to 90% of a parcel’s value or $75–$150 per shipment, a dramatic shift for companies that relied on small-package loopholes to flood the U.S. market with inexpensive goods.

“The decision to close the de minimis loophole has been like a targeted weed killer,” Mike Ryan, an analyst at Smarter Ecommerce, told the Financial Times.

The price advantage that helped Temu and Shein amass tens of millions of American customers is now eroding, and with it, their digital dominance. Temu’s app, once a top-five staple in Apple’s U.S. App Store, has dropped to 75th place, according to the BBC. Shein, previously in the top 15, is now ranked 58th, reflecting a rapid decline in user acquisition.

Both companies have urged customers to shop before prices rise and said they were “doing everything we can to keep prices low and minimize the impact on you.”

Advertising Cuts Could Hit U.S. Platforms

The shift could dent revenues for major U.S. advertising platforms. Meta, whose advertising business brought in $18.4 billion from China-based advertisers last year, more than 10% of its total, warned investors in January that tariffs and trade disputes posed a material risk to its business.

Temu and Shein were among the largest Chinese advertisers in the U.S. in 2023 and early 2024. Temu alone was the top U.S. advertiser on X last year. According to marketing intelligence company WARC, the recent ad cuts will likely affect sales, as “they need to constantly advertise to keep customers,” said James McDonald, the company’s director of data intelligence and forecasting.

While their combined U.S. market share remains under 1%, according to Consumer Edge, Temu and Shein accounted for more than 30% of the 1.5 million daily tariff-free shipments to the U.S. last year, based on congressional reports and customs data.

The loss of the de minimis privilege, long criticized by U.S. lawmakers as an unfair advantage, has bipartisan support. In 2023, 1.4 billion packages entered the U.S. under the provision, up from 140 million in 2013, customs authorities report.

Amazon and U.S. Retailers Eye Opportunity

Amazon, which has faced margin pressure from the deep discounts offered by its Chinese rivals, is already adjusting. Last November, the e-commerce giant quietly launched Haul, a sub-platform for products under $20, in what many viewed as a direct response to Temu and Shein.

Now, with tariffs set to level the playing field, U.S. retailers may see an opening to reclaim market share, though it could come at the cost of higher prices for consumers.

As Trump’s administration pushes ahead with additional levies that could raise tariffs on certain Chinese goods to as high as 245%, the road ahead for Chinese e-commerce upstarts looks steeper.