Temu Struggles Amid U.S. Tariffs and Amazon’s Aggressive Pricing Tactics

Temu, the Chinese online shopping platform that has attracted millions of Australian users, is facing mounting challenges as U.S. tariffs take effect and Amazon ramps up competition globally.

The rivalry between Temu and Amazon is not only reshaping global e-commerce but also impacting the bottom lines of major discount retailers such as Big W, Target, and Kmart, according to industry insiders. Local retailers are reportedly losing customers to international players offering lower prices and greater convenience with both Temu and Amazon ramping up marketing in Australia especially to existing customers.

Temu, owned by China’s PDD Holdings, is scrambling to source goods from former suppliers after the Trump administration removed the de minimis rule—previously allowing duty-free imports under a set value.

The policy shift has stalled Temu’s growth in the U.S., with its monthly active users plummeting 54% to 37 million between March and mid-July, according to Sensor Tower data.

This has led to the Chinese ecommerce operator chasing marketshare in markets such as Australia, Asia the EU and the UK.

Making matters worse, Amazon has moved swiftly to fill the gap, pressuring suppliers to avoid undercutting its prices on branded goods.

“We’ve told them they can’t undercut Amazon with the same stuff—it has to be materially different products,” a senior executive at a major third-party seller told the Financial Times.

The result: Temu is being forced to rethink its business model. In the U.S., it has slashed advertising in response to the tariffs, contributing to a sharp drop in user engagement. This pullback could cost tech giants like Google and Meta over A$2.3 billion in lost ad revenue, with Morgan Stanley estimating Temu spent around A$2.5 billion on Facebook and Instagram ads last year alone.

With the U.S. market tightening, Temu is doubling down on tariff-free regions like Australia, ramping up promotions and discounts in an effort to win back users. Analysts say this strategy is further disrupting local discount chains, especially as Amazon also slashes prices in a bid to dominate.

To stay competitive, Temu is offering new incentives to sellers—such as lower fees—to encourage them to list on the platform. However, sellers remain cautious, warning that Amazon can quickly match or beat prices due to its scale and ability to absorb short-term losses.

“Unless PDD is prepared to lose billions annually for the next five years to gain market share, it needs a smarter approach,” said retail consultant Martin Heubel, who brokers deals with Amazon vendors.

Under existing arrangements, Amazon vendors often agree to absorb the cost of price reductions, allowing the retail giant to maintain its margins while still offering low prices. Amazon maintains these deals are voluntary and designed to keep prices competitive.

For Temu, alternatives include focusing on unbranded products or offering bulk discounts—strategies common in large discount outlets.

“The only way Temu can compete on higher-quality goods is by avoiding branded items or selling overstock and returned products at lower prices,” Heubel said.

Author Credits- David Richards
CHANNELNEWS