How Temu is Transforming its Supply Chain Management in Response to Trump Tariffs

The e-commerce landscape is undergoing a seismic shift as Temu, the budget-friendly online shopping giant, adapts to new U.S. trade policies. Following the Trump administration’s recent tariffs and the closure of the “de minimis” exemption, Temu is overhauling its supply chain management style. These changes aim to mitigate the impact of higher costs while maintaining its competitive edge in the market. Here’s a closer look at what this transformation entails and how it could affect businesses and consumers alike.

What Prompted the Change?

On February 1, 2025, the Trump administration issued an executive order ending the “de minimis” exemption for imports from China. This exemption had allowed low-cost shipments valued under $800 to enter the U.S. tariff-free, a loophole that companies like Temu and Shein had leveraged to offer steep discounts to customers. The closure of this loophole, coupled with new tariffs on Chinese goods, has forced Temu to rethink its operational model.

Temu’s New Supply Chain Strategy

To adapt to these policy changes, Temu is shifting from its traditional model of centralized control over shipping and pricing to a more decentralized approach. Here are the key elements of its new strategy:

1. “Half-Custody” Policy:
   • Temu is now asking merchants to ship goods in bulk to U.S.-based warehouses instead of handling logistics directly from China. This “half-custody” model allows Temu to focus solely on managing its online marketplace.
2. Local Fulfillment:
   • Similar to strategies adopted by Shein, Temu is increasingly relying on U.S.-based vendors and warehouses for order fulfillment. This reduces cross-border shipping costs and delivery times, though it may come at the expense of higher operational costs.
3. Incentivizing Merchant Participation:
   • While not mandatory yet, Temu has indicated that merchants who adopt this new system will receive priority on its platform. This move aims to encourage widespread adoption of the new supply chain model.

Challenges and Risks

The shift in supply chain management comes with potential drawbacks:

• Higher Prices:
  • Merchants may lose economies of scale in shipping and handling, leading to increased costs that could be passed on to consumers.
• Operational Complexity:
  • The decentralized model requires merchants to take on more responsibility for logistics, which could lead to inefficiencies and delays.
• Market Competition:
  • As Temu adjusts its model, competitors like Amazon and Walmart may exploit any disruptions to capture market share.

Why This Matters for Consumers

Temu’s ability to offer ultra-low prices has been a cornerstone of its success. However, with these new tariffs and supply chain adjustments, customers may see higher prices and longer delivery times. While this could narrow the gap between Temu and traditional retailers, experts believe that Temu’s focus on trendy products and cost-effective operations will help it weather these challenges`.

Looking Ahead

Despite these hurdles, Temu’s proactive approach demonstrates its commitment to adapting in a rapidly changing trade environment. By decentralizing its supply chain and prioritizing local fulfillment, the company aims to mitigate tariff-related costs while maintaining its appeal as a budget-friendly shopping platform.For businesses navigating similar challenges, Temu’s strategy offers valuable insights into how supply chain flexibility can help mitigate external pressures. As global trade policies continue to evolve, companies must remain agile and innovative to thrive in this competitive landscape.

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Sources:

1. Temu Switches Supply Chain Management Style Following Tariffs – PYMNTS
2. Temu Overhauls Supply Chain After Trump Tariffs – Straits Times
3. Temu Steers Users to ‘Local’ Products After Trump Ends De Minimis – CNBC
4. A Tariff Loophole is Closing: Why That Matters for Shein, Temu – LA Times
5. Prices on Groceries, Cars, and Popular Products From Shein and Temu Could Spike Amid Trump’s Tariffs – Forbes