Quote from James A.Hart on July 16, 2025, 8:44 pm

There was a time when it seemed like Chinese eCommerce was on track to conquer the U.S. market. Shein and Temu weren’t just popular — they were dominating.

Temu once matched Amazon in web traffic. Throughout 2023, both companies consistently ranked among the top three most downloaded shopping apps in the U.S. Temu frequently reached the #1 spot on the App Store, with Shein often right behind.

At one point, Temu had over 100 million downloads in the U.S. alone and spent nearly as much on digital ads as Amazon — even outspending every other retailer.

Meanwhile, Shein reportedly generated up to $45 billion in annual revenue, launching thousands of new fashion items daily, many based on trending TikTok data. Temu sold everything from socks to power drills — at prices so low, some questioned whether they were even legal. And in some ways, they weren’t wrong.

Both companies exploited a legal loophole to avoid paying import duties, flooding the U.S. with ultra-cheap goods while burning billions on ads and subsidies to gain market share. The strategy worked so well that even Amazon took notice. Jeff Bezos was reportedly watching closely, and Amazon quickly launched a low-cost storefront called Amazon Haul in response.

The Secret Behind Their Meteoric Rise

To understand why Shein and Temu are now facing headwinds, we first need to understand how they rose so quickly in the first place.

Shein didn’t become the most downloaded shopping app in America by accident. The company redefined fast fashion with a data-driven model that tapped into real-time trend analysis, lightning-fast production cycles, and algorithms capable of identifying and launching new designs within days — not weeks.

Temu took a different approach. Backed by Chinese giant PDD Holdings, Temu entered the U.S. market in 2022 with a clear mission: expand as aggressively and rapidly as possible. Their prices made even Amazon look expensive, and they went big on branding — including a flashy Super Bowl ad with the message: “Shop Like a Billionaire.”

Some reports suggest Temu was willing to lose up to $30 per U.S. customer just to capture market share. But their real competitive edge wasn’t just clever advertising or cheap labor. The secret weapon? A legal loophole in the U.S. import system.

The Legal Loophole That Changed the Game

At the heart of it all was a little-known legal provision called de minimis, which allows any shipment valued under $800 to enter the U.S. without incurring import duties.

Rather than importing goods in bulk through traditional channels, Shein and Temu took a different route: they shipped small individual packages directly from China to customers’ doorsteps. No import taxes. No warehouses needed in the U.S. No delays at customs. And it worked — almost too well.

In less than a year, Temu reached 100 million downloads on the U.S. App Store. Shein continued to generate over $45 billion in annual revenue. The retail playbook was flipped upside down. It wasn’t just small brands that were concerned — even Amazon started to feel the heat.

Toward the end of 2024, Amazon quietly launched “Amazon Hall” — a budget-focused storefront featuring low-cost products, many sourced directly from China. The move wasn’t heavily promoted, but the intent was clear: respond to Temu’s rapid rise. Jeff Bezos reportedly even spoke directly with Donald Trump about tariff-related issues, as U.S.–China trade tensions began to flare up again.

At this point, Temu and Shein were no longer fringe players. They were actively eating into Amazon’s market share, especially among younger consumers who didn’t mind waiting a few extra days if it meant saving 40–60% on nearly identical products.

Meanwhile, frustration boiled over in the Amazon seller community. Forums were filled with complaints that Amazon was turning into “Temu trash” — a place where brand loyalty and fast shipping no longer mattered. Price was king. And by now, one thing had become clear: Shein and Temu weren’t just passing trends. They were a real threat.

The Collapse Begins

Then everything changed — with a single announcement.

On May 2, 2025, former President Trump unexpectedly declared an end to the de minimis exemption for shipments from China and Hong Kong. He called it “a scam against America,” and imposed a staggering 90% tariff on all packages valued under $800. Although that rate was later revised down to 30%, the damage had already been done.

Temu’s entire business model hinged on that loophole. Once it was closed, prices had to rise — and rise sharply. Almost overnight, Temu’s U.S. performance began to plummet. Between March and June 2025, Temu lost over half its monthly active users in the U.S., dropping from more than 80 million to around 40 million. Shein also saw a 12% decline in the same period.

Worse yet, both companies slashed their ad budgets. Temu cut its U.S. marketing spend by 87%, and Shein pulled back nearly 70%. These giants, once ubiquitous across every platform, suddenly vanished from your news feed.

The result? They fell off the charts. Temu, which once ranked among the top 10 apps in the U.S., dropped out of the top 60 in just a matter of weeks. The golden age of subsidized Chinese eCommerce in America had come to an end.

The Desperate Pivot

With its U.S. strategy collapsing, Temu was forced to pivot. The solution? Stop shipping from China altogether.

Temu quickly restructured its entire U.S. operation, shifting to local fulfillment through third-party sellers based within the country. This move helped them bypass the new tariffs — but it came at a cost: higher expenses, longer restocking times, and most critically, a loss of control over quality and inventory.

Temu was no longer the ultra-efficient, algorithm-powered selling machine it once was. Gone were the days of lightning-fast logistics and unbeatable prices. Instead, it became just another marketplace — thin margins, frustrated users, and a shrinking customer base. With its advertising budget slashed, Temu started fading from view on platforms like Google, TikTok, and Facebook. Fewer ads led to fewer app installs. Fewer installs led to fewer sales. The downward spiral had begun.

By this point, it was clear to everyone: Temu wasn’t just slowing down in the U.S. — it was unraveling.

Shein and the IPO That Never Happened

While Temu struggled to stay afloat, Shein turned its attention to Wall Street.

For over a year, Shein worked toward a blockbuster IPO — first aiming for a U.S. listing, then pivoting to the U.K. But both governments responded with caution. Regulators raised red flags over opaque supply chains, allegations of forced labor, and concerns about user data privacy. In the end, Shein quietly shifted its focus to Hong Kong, where the listing process tends to be less scrutinized.

Despite its massive scale, Shein remains heavily reliant on global growth — and the U.S. market is the crown jewel in that strategy. But now, that jewel is beginning to crack. Without the tax loophole, Shein is forced to either raise prices or accept shrinking margins. And while the brand still enjoys support from TikTok influencers and a loyal Gen Z fanbase, engagement is noticeably down. As user activity declines, the case for a global IPO becomes harder to justify.

Europe: The Final Frontier?

With the U.S. door closing fast, Temu and Shein quickly shifted their focus to Europe. And for now, that pivot seems to be working.

According to data from Sensor Tower, Temu’s monthly active users surged by 76% in France, 71% in Spain, and 64% in Germany. Shein also saw strong growth in the U.K., France, and Germany. Their ad budgets tell the same story: Temu increased its ad spend in France by a whopping 115%.

They’re making a big bet on Europe as their next battleground. But the clock is already ticking.

European lawmakers are starting to raise the same concerns seen in the U.S. — from data privacy and supply chain transparency to accusations of unfair competition. One proposal currently under discussion would impose a €2 fee on every small parcel shipped from outside the EU. Meanwhile, the U.K. is also reviewing its own de minimis rules. If these doors begin to close, Temu and Shein could find themselves under pressure once again — just as they were in the U.S.

For now, Europe is their lifeline. But it’s clearly not a long-term solution.

Amazon Strikes Back

As Temu and Shein scrambled to stay afloat, Amazon didn’t sit still.

Amazon Haul — a quiet experiment featuring ultra-low-cost products — began rolling out in late 2024. The strategy was clear: offer users a “Temu-like” experience, but backed by Amazon’s trusted delivery infrastructure and brand reliability.

Initial feedback was mixed, but the message was unmistakable: Amazon wasn’t just playing defense — it was going on the offensive. U.S.-based sellers applauded the move, while cost-conscious shoppers who had once left for cheaper options started to return.

This wasn’t just a tactical move — it was a statement:

“You might beat us on price for a while, but you won’t outlast us.”

And that’s exactly what’s playing out.

Temu and Shein burned through billions trying to buy user “loyalty.” But what they really built was a habit: chasing the cheapest price. And once prices rose and ads disappeared, users vanished too. Meanwhile, Amazon held its ground. Still more expensive? Maybe. But increasingly irreplaceable.

China’s Global Ambition

The rise of Shein and Temu was never just about $2 phone cases or viral fashion trends. Behind their explosive growth was something far more strategic: China’s global ambition — spanning economics, technology, and cultural influence — playing out through the battleground of international commerce.

These companies weren’t just scrappy startups. They were vehicles in a much broader campaign to dominate global consumer platforms. But the collapse in the U.S. exposed a critical vulnerability: once operational advantages were stripped away — when legal loopholes were closed and ad budgets dried up — the seemingly unstoppable machine began to crack.

The lesson isn’t that China can’t build a global empire. It’s that in order to win sustainably in Western markets, low prices and scale alone aren’t enough. Transparency, regulatory compliance, and the ability to engage with lawmakers are just as essential.

For the U.S., this was also a wake-up call. It took years for the government to address a loophole that drained billions in tax revenue and undercut domestic retailers. Without timely action, Temu and Shein might still be dominating today.

And for Amazon, this entire episode proved one thing: even the world’s biggest giant can be challenged.

Now, both Shein and Temu are restructuring, looking toward Europe and Latin America for their next phase of growth. But their golden age in the U.S. is over.

What remains is not just a story about fashion. It’s a case study in how global ambition collides with law, politics, and power.