Trading Platform Switches to American Suppliers Following Customs Loophole Closure

Chinese online giant Temu has completely halted direct shipments of goods from China to American customers, abruptly pivoting to domestic supply chains after Washington closed a customs loophole that had allowed it to maintain low prices. These changes followed the May 2, 2025 termination of the “de minimis” rule, which had previously exempted parcels worth up to $800 from import duties. Now, all orders for American customers are processed by US-based suppliers and shipped from local warehouses, allowing the company to avoid new tariffs reaching as high as 145% and maintain competitive prices.

Radical Business Model Restructuring Under Customs Policy Pressure

The changes in Temu’s operations were triggered by the Trump administration’s decision to end the “de minimis” rule, which the government believed was harming American businesses. Without this exemption, goods imported from China now face duties that, according to Temu, can reach 145%, virtually eliminating the Chinese online seller’s price advantage.

In a statement to CBS MoneyWatch, the company said its prices “remain unchanged as the platform transitions to a local fulfillment model.” The statement added that all U.S. orders are now supplied by sellers based in the country and shipped from domestic warehouses.

A visit to Temu’s U.S. site on May 3 showed only items tagged “local,” signaling that they are stocked in American warehouses and, therefore, not subject to the higher import taxes.

“Without the ‘de minimis’ loophole, Temu faced an existential challenge to its business model,” notes Melissa Chen, retail analyst from consulting firm Retail Dive. “The company was forced to completely restructure its logistics chain in record time, which is an unprecedented move for a platform of this scale.”

The company said it is “actively recruiting U.S. sellers to join the platform,” a shift from its earlier practice of relying on China-based merchants who mailed goods directly to American buyers at rock-bottom rates.

“The move is designed to help local merchants reach more customers and grow their businesses,” Temu said.

Background of the Conflict and Consumer Warnings

Former president and current President Donald Trump had called the old $800 threshold “a big scam going on against our country, against really small businesses” at an April 30 event, two days before the exemption lapsed.

Temu has added a banner to its site to explain the new setup. The new banner on the Temu site reads, “No import charges for all local warehouse items and no extra charges upon delivery. Items marked with the ‘Local Warehouse’ tag are shipped from within your country or region. This means you do not need to pay any import taxes or customs fees.”

This overhaul comes after U.S. customers complained that tariff surcharges, sometimes double the value of the merchandise, were deterring them from checking out.

“Many consumers were shocked when they saw their $20-30 orders suddenly balloon to $50-60 due to unexpected duties,” says Jason Lee, founder of e-commerce consulting firm Digital Commerce Partners. “For a business model built on ultra-low prices, this would have been a fatal blow.”

Temu had warned users in April that higher costs were on the horizon. “Due to recent changes in global trade rules and tariffs, our operating expenses have gone up. To keep offering the products you love without compromising on quality, we will be making price adjustments starting April 25, 2025,” the company told shoppers in a message posted that month.

By pivoting to local stock, Temu aims to keep sticker prices level while sidestepping the new duties that now apply to China-sourced parcels.

Global Implications and the Future of Cross-Border E-Commerce

Temu’s decision to completely abandon direct shipments from China is an illustrative example of how changes in trade policy can rapidly transform business models, especially in e-commerce. It also testifies to the continuing tension in trade relations between the US and China, which began during Trump’s first term and appears to be intensifying in his second term.

“This is a classic example of how protectionist policies can transform a market virtually overnight,” comments Robert Sanders, professor of international business at Georgetown University. “Temu had to choose: either significantly increase prices and lose its main competitive advantage, or radically change its business model. They chose the latter.”

Temu’s transition to American suppliers could also have significant consequences for manufacturers in China who previously relied on the platform as a channel to access the American market. Many of these manufacturers will now be forced to seek alternative routes to reach American consumers or focus on other markets.

For American consumers, the question arises whether Temu can maintain its appeal without direct access to cheap Chinese goods. Although the company claims prices will remain unchanged, experts express doubts about the long-term sustainability of this strategy.

“Building a reliable network of American suppliers capable of competing on price with Chinese manufacturers is a serious challenge,” notes Karen Johnson, e-commerce market analyst from Forrester Research. “We may see initial subsidies from Temu to maintain low prices, but in the long run, market logic will prevail.”

Temu’s new business model may also present an interesting opportunity for American small and medium-sized enterprises, which can now access the platform’s huge customer base without having to compete with Chinese importers. This potentially creates a new growth channel for local businesses, which is ironic considering that protecting American business was the Trump administration’s main argument for closing the “de minimis” loophole.

“We’re watching a major Chinese platform potentially transform into a powerful player in domestic e-commerce,” concludes Sanders. “It’s a striking example of how companies can adapt to regulatory constraints and potentially create a new model of success in the process.”

It will be interesting to observe how the situation develops in the coming months as Temu continues to expand its American supplier network and adapt to the new reality of cross-border e-commerce in an era of growing protectionism.