What: Trump's elimination of the $800 duty-free threshold forces Shein and Temu to retreat from the US market, with user engagement dropping by 51% and 12% respectively.

Why it is important: The dramatic decline in user engagement reveals the vulnerability of cross-border e-commerce models to regulatory changes, while highlighting opportunities for domestic retailers and established platforms to reclaim market share.

The impact of Trump's trade policy changes has dealt a significant blow to Chinese e-commerce giants Shein and Temu in the US market. Following the elimination of the duty-free exemption for parcels under $800, Temu's monthly active users plummeted by 51% to 40.2 million between March and June, while Shein experienced a 12% decline to 41.4 million users. This dramatic shift has been accompanied by substantial reductions in advertising expenditure, with Temu cutting US ad spending by 87% and Shein by 69% compared to the previous year. Both companies have responded by pivoting their focus to European markets, where they've seen significant growth. However, their European expansion faces potential challenges as the EU plans to implement a €2 fee on small packages, and the UK considers ending its import duty exemption scheme. The companies' strategic responses include Temu's shift to US-based sellers and both platforms' increased focus on European market development.

IADS Notes: The retail landscape has witnessed a seismic shift in cross-border e-commerce dynamics. In February 2025, as the EU implemented comprehensive platform liability reforms, Shein's IPO valuation was cut to $50 billion, reflecting mounting regulatory pressures. The impact intensified in April 2025 when both Shein and Temu dramatically reduced their US digital advertising spend, with Temu slashing expenses by 31% and Shein by 19%. This marketing pullback coincided with Amazon's strategic expansion of its Haul service, demonstrating how established players can capitalise on regulatory disruption. The industry's adaptation continued with Shein's February 2025 initiative to offer 30% higher procurement prices for manufacturing relocation to Vietnam, though this faced resistance from Chinese authorities. By May 2025, the EU's proposal of a €2 fee on small packages further exemplified the global trend toward stricter oversight of cross-border e-commerce.

US shoppers ditch Shein and Temu as Trump closes tax loophole