US tax rule forces costly pivot at Pinduoduo (拼多多), weighing on profits

Pinduoduo posts first annual profit decline as Temu spending bites

Pinduoduo (拼多多) reported 2025 revenue of 4,318 billion yuan, up 10% year‑on‑year, but net profit fell to 994 billion yuan, a 12% decline — the first annual profit drop since the company listed. Management told analysts the hit is driven by deliberate heavier investment: full‑year costs rose to 1,888 billion yuan, up 23% and growing much faster than revenue. Overseas expansion via its cross‑border platform Temu is a key line item in that spending, and a sudden change in U.S. import policy accelerated the pressure.

A Washington change that upended Temu’s low‑price playbook

How did a tax tweak in Washington cascade into a billion‑dollar problem? On May 2, 2025 the U.S. terminated the de minimis exemption for packages under $800 (T86), removing a cost advantage Temu had exploited with low‑value, air‑shipped parcels. It has been reported that tariffs on some items briefly spiked to as high as 245%, and that for low‑margin items — a $9.90 phone case was cited — combined tariff and air‑freight costs turned previously viable listings into losses. The removal of T86 forced Temu to abandon large swathes of its air‑direct model and reorganize fulfillment and pricing.

Logistics overhaul, new modes and mixed results

Temu has rapidly shifted toward sea‑freight, local pre‑stocking and a “half‑managed” merchant model that shares tariff and logistics responsibility with sellers; it has been reported that Temu’s 2025 GMV reached roughly $90–95 billion, up from about $48 billion in 2024, but still short of internal targets because U.S. performance lagged after the tariff change. The company also accelerated local‑warehouse strategies in North America and Europe and introduced a Y2 variant (platform retains procurement but merchants handle customs) to blunt changes in EU and U.S. de minimis rules. Reportedly, Temu aims for more than 80% local‑warehouse fulfilment in major Western markets in 2026, though conversion of merchants to semi‑managed models has so far underperformed targets.

Bigger picture: policy risk meets global e‑commerce competition

The episode highlights how geopolitical and trade policy shifts can quickly reprice China’s cross‑border e‑commerce playbook. The EU plans to eliminate the €150 de minimis threshold in 2026 and add per‑order fees, creating a parallel headache. Meanwhile Temu faces entrenched local competitors such as Amazon, Shopee and regional players in Latin America and Southeast Asia. It has been reported that some analysts worry aggressive user‑and‑GMV growth could trigger local protectionist or platform‑level pushback. For Pinduoduo, the question is stark: can heavy investment and operational reinvention translate into sustainable profits, or will policy shocks keep pushing Temu into a prolonged transition?