The Rundown - Deep Dive: Will Temu Survive Trump's China War?

Episode Date: March 23, 2025

Temu, the Chinese e-commerce giant, gained major traction in the U.S. over the past few years with its ultra low prices. Now, Donald Trump is working to cut off legal loopholes used by Temu and other e-commerce players, making it harder to import cheap Chinese goods to America. In response, Temu has made moves into Amazon's business, taking third-party sellers from America's largest e-commerce company. Will Temu survive without it's aggressive pricing model, and will it be able to beat Amazon for American e-commerce dominance?The content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures.Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome back to the rundown for another weekend deep dive. Today, we are talking about the uncertain future of Timo, the e-commerce app that has gained massive popularity in the U.S. thanks to insanely chief products shipped directly from China. But now, the whole business model could be in danger because a tax loophole might be going away soon. Timo's parent company, PDD Holdings, is already starting to see its slowdown in growth.

So what's going to happen to Timu if they can't sell $2 drones and $4 tuxedos anymore. That's what we're talking about today. Let's break it down. Timo launched in the U.S. in September of 2022. And a few months later, they had an ad during the Super Bowl with the slogan, shop like a billionaire. Now, I remember seeing that commercial,

and I would have never guessed that Timo would go on to become the biggest app in the U.S. for two years in a row. Now, that was a Super Bowl where the Chiefs beat the Eagles. And just like the Chiefs at the time, Timu's fortunes were on the rise. But in 2025, the story looks way different. The chiefs just lost to the Eagles in the Super Bowl,

and Timo is starting to face a bunch of challenges. Timo is owned by a Chinese company, PDD Holdings. And PDDD also owns a very popular Chinese e-commerce platform called Pindu-Duo. So the company had experience on how to run a successful e-commerce platform. They took everything they knew from China and applied it to the U.S. And it was a huge success. After Timo's launch in late 2022, Timo's sales had hit nearly $35 billion. in 2020. In fact, Timu was the most downloaded app on the app store in both 2023 and 2024.

Everyone fell in love with Timu's crazy low prices. Now, I remember my parents were addicted to it. I mean, my dad still can't believe some of the prices on there. I'm talking steak knives and power tools and dress shirts for like four bucks. Now, to be fair, most of the stuff on there is junk and you have to wait like two weeks just to get it because the product is coming directly from China. but hey, it's crazy cheap. Like, I remember my dad buying a mechanical screwdriver for like $4. And then it stopped working after a couple months. But he was cool with it.

Because if you bought the same thing at Home Depot, he was looking at like $20. So it's easy to see why Timu became so popular. And it wasn't the only app out of China to gain popularity in the U.S. Sheehan also became very popular by offering really cheap clothing. And the rise of these Chinese e-commerce platforms have resulted in corporate casualties in the U.S. For example, U.S. Retailer Forever 21 recently. filed for bankruptcy and they're going to close all their stores. The company says they were being hurt by rising costs of inventory and wages,

and they were also struggling to fend off competition from the likes of Sheehan and Timu. Now, the one company not backing off is Amazon. In fact, they're trying to compete with these low-cost platforms by launching Amazon Hall, which they did last November. It's essentially a Timu knockoff where you can buy products directly from China at very low prices. So Timu is starting to see some competition from U.S. players, and that's already starting to have an impact on their business. Tmu's parent company PDD Holdings recently posted their earnings

and they had the slowest revenue growth since early 2022. PDD's revenues grew by 24% in Q4, compared that to 123% growth in sales in the same quarter last year. So PDD's business is starting to slow down a bit. Now, PDD executives have been warning that a slowdown was coming for a while. They highlighted increased competition and external factors as headwomen. And one of the biggest headwinds right now that the company is facing is a tax loophole that might be going away that could completely upend their business model. So let's talk about the biggest challenge the company is about to face.

The de minimis loophole going away. So what is the de minimis loophole? I mean, it's a fun word to say, but why is it so important? Well, according to the National Foreign Trade Council, this rule allows any packages with a value of less than $800 to be shipped into the U.S. without having to pay any taxes or duty fees. And it's because of this loophole that Timu has been able to sell $2 yoga pants and still make money. Because they're not being taxed or tariffed on any of their products going into the U.S.

And when I say that Timu and Sheehan really take advantage of this loophole, I got some numbers for you. See, back in 2014, there were about 140 million de minimis shipments coming into the U.S. In 2024, that number is now almost 10x to 1.3 billion packages. This is according to the White House. And according to Congress, Timu and Sheehan might account for around 30% of those shipments. So this de minimis loophole is critical for their business. Because if it goes away, they're going to have to start paying taxes and tariffs on all the shipments going into the U.S. Which means they're going to have to raise the prices of their products to keep making money.

So you can see why these companies are freaking out the de minimis is going away. In fact, it actually did go away. The Trump administration removed the de minimis loophole back in February. But they ended up temporarily reversing that decision because of the logistical chaos that it caused. When that exception got removed, it required the millions of de minimis packages coming into the U.S. every day to switch to a slower entry procedure. And that caused shipping times to go way up and fees to go way up as well. I mean, you can imagine the logistical nightmare that U.S.PS had to deal with when de minimis was taken away overnight. So the de minimis loophole is still in place for now to give these shipping companies some time to adapt.

But at some point, this loophole will be removed again. Trump really wants to get rid of it. He thinks that this rule makes it easier for people to smuggle drugs like fentanyl into the country. And other leaders in the U.S. have said some of these cheap products coming in from China could be dangerous to Americans. So the de minimis era is likely coming to an end pretty soon. And that's going to be a huge problem for Timo. But the company is already working on plans to survive without it.

So let's talk about that. Timu is already looking at a world where the de minimis exception is gone. They're starting to sell local products in the U.S. Essentially, they're trying to build their own Amazon. And they've already started to make a dent. If you go to the Timo app right now, there are options to buy products from sellers based in the U.S. Timo is starting to convince sellers to sell on their platform

by incentivizing them with lower fee structures compared to Amazon. See, by offering a lower fee, sellers can take home more profits, which would allow them to sell products cheaper than on Amazon. So it looks like Timo is still trying to undercut Amazon's prices as part of its strategy. They might not be able to do it at the same level as shipping products directly from China, but cheaper is cheaper.

And sellers in the U.S. love this because Timo is a great alternative to Amazon. It allows sellers to diversify and not have to rely on Amazon for all their sales. Now, Timo still has a long way to go here. Amazon currently controls like 40% of the e-commerce market in the U.S. as of 2024. Timu is still only in the single digits right now. On top of that, Amazon is still making upgrades to its shopping capabilities.

recently struck a deal with meta to allow people to buy Amazon products without leaving meta's social media apps like Facebook and Instagram. So you can just buy an Amazon product on Instagram without having to go to the Amazon app. That is dangerous for my Amazon budget. But overall, I think this is good, right? Like more competition is good. No one has really been able to challenge Amazon's dominance in e-commerce in the U.S. Maybe team whose presence will get Amazon to lower fees and continue to innovate and offer cheaper

prices. Like, I'm sure U.S. sellers are really happy to see. Timu try to take on Amazon. Maybe that's how we finally tackle inflation. Timu and Amazon just keep pushing prices lower. So there you have it. You know, the Timu story is very impressive. They became a household name essentially overnight by offering extremely low price goods that came directly from China and taking advantage of the de minimis loophole. But the company is now facing a ton of challenges. Sales are starting to slow down because of increased competition from Amazon and the de minimis era is coming to an end. So that's going to make it harder for Timu to

offer $5 steak knives and $2 yoga pants. So can Timu reinvent itself as a U.S. e-commerce retailer and a legit competitor to Amazon? I guess we'll have to see. But, you know, just in case, you might want to order all the cheap stuff while you still can. Well, all right, guys, that's it for today's weekend, deep dive. If you guys enjoyed today's show,

don't forget to subscribe to the podcast, especially on YouTube and Spotify. We actually filmed these deep dive episodes with videos, so you can watch that on Spotify or YouTube. So I highly recommend doing that. And if you guys have any topics that you want us to cover in future deep dive episodes, let us know in the comments. Thank you guys again for listening. Shout out to Mike and Connor for all the help behind the scenes.

And we'll see you guys back here on Monday.