Temu Faces Uncertain Future After Parent Company Loses $50B Rapidly

Donald Tang, Shien’s executive chairman, has previously called for equitable reforms to “de minimis."

Temu, the Chinese retailer that has exploded over the last few years, is now facing an uncertain future after its parent company lost $50 billion essentially overnight. It faces more regulatory scrutiny from several governments as well as competition from other Chinese fast-fashion retailers.

According to Fortune, PPD Holdings dropped 30% of its value on Aug. 26 after a worrisome report indicated that its flash-fire growth may soon come to an end.

“Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges,” Jun Liu, PDD Holdings’ financial chief, said in a press release. “Profitability will also likely…be impacted as we continue to invest resolutely.”

The intensified competition Liu referred to will come in the form of Tik-Tok Shop and its competitor Shien as well as a planned low-cost Amazon storefront. As for the external challenges, Temu is facing scrutiny over its use of import trade loopholes, questions over the quality and origin of its products, adherence to product safety, and questions about whether it sells products made by forced laborers from several governments.

To that end, bi-partisan legislation aimed at closing the “de minimis” trade loophole was proposed earlier in August, which Temu uses to bypass customs investigation and import taxes because its customer packages are generally under $800 due to its low-priced items.

According to Barron’s, although representatives for Shien and Temu did not respond to their request for comment about the legislation, Donald Tang, Shien’s executive chairman, called for equitable reforms to “de minimis” via a 2023 letter to the American Apparel and Footwear Association.

“Shein believes the de minimis framework should be reformed to create a more level, transparent playing field—one where all retailers play by the same rules and where the rules are applied evenly and equally, regardless of where a company is based or ships from.” Tang wrote.

In February, Sen. Sherrod Brown (D-OH) and Sen. Rick Scott (R-FL) called on President Joe Biden to use his executive power to close that particular trade loophole in the name of assisting American manufacturers.

According to the press release from the office of Brown, the senators wrote, “[T]he Chinese Communist Party (CCP)—one of the worst trade and human rights abusers—directly benefits from duty-free access to the U.S. market for shipments valued under $800. This generous gift comes with no rule of origin requirements, reciprocal market access, or labor or environmental standards. Simply put, the CCP and others utilizing de minimis can get rich while getting away with a host of trade infractions that undermine U.S. manufacturing, harm American workers, and expedite the flow of fentanyl and other harmful goods into our communities.”

The senators continued, “The existence of this U.S. policy loophole also unfairly benefits foreign companies and overseas e-commerce platforms such as Temu, SHEIN, and AliExpress, allowing them to evade tariffs, duties, taxes, and compliance with other U.S. customs laws and regulations that U.S. companies and brick and mortar stores must comply with. There are no consequences for these actions because they are currently legal under the outdated and convoluted ‘de minimis’ loophole.”

However, much like the panic from lawmakers around China and Tik-Tok regarding data usage, some of these concerns gloss over how American companies also use the loophole for the furtherance of their own ends, just as American companies like Google often play fast and loose with consumer data for their benefits.

As Jason Goldberger, the chief commerce strategy officer at Publicis Groupe, told Fortune, “There’s no white hats and black hats in any of this. It’s all shades of gray.”