Online retail giant Temu, owned by PDD Holdings Inc., is overhauling its supply chain operations in response to US tariff measures initiated by President Donald Trump, Bloomberg reports.
The company’s shift is expected to impact prices on the popular budget shopping platform, with merchants potentially facing higher costs and some vendors likely withdrawing from the US market.
Temu has traditionally handled most aspects of its supply chain, including pricing, shipping, and marketing. However, the company is now urging merchants to ship goods to American warehouses themselves under a “half-custody” model. In this new framework, Temu will primarily focus on managing the online marketplace.
Although this model isn’t mandatory yet, Temu has indicated it will prioritize vendors who adopt the new structure. The long-term plan is to fully transition its US operations to this approach, according to insiders familiar with the matter.
The shift threatens to drive up prices on Temu’s platform as merchants lose the cost advantages of centralized shipping and handling. Vendors will also need to account for higher delivery expenses due to Trump’s tariff measures.
Smaller merchants, in particular, may find it challenging to secure favorable shipping rates or manage logistics independently, potentially prompting them to exit the US market altogether.
By adopting the “half-custody” framework, Temu is moving away from a model similar to Amazon’s, which relies heavily on in-house logistics and delivery infrastructure to maintain market dominance. Amazon controls about 38% of online spending in the U.S. thanks in part to its comprehensive logistics network.
Temu is not alone in its efforts to navigate the shifting trade landscape. Rival Shein is also taking steps to mitigate the effects of Trump’s tariff policies. The company is reportedly incentivizing Chinese suppliers to establish production facilities in Vietnam, offering up to 30% higher procurement pricing to maintain duty-free small parcel shipments to the US.
Both companies previously benefited from the “de minimis” rule, which allowed goods valued under $800 to enter the US tariff-free. Last year alone, Temu and Shein collectively shipped $46 billion worth of small parcels to the US, according to Nomura Holdings Inc. estimates.
