China's Temu Owner PDD Holdings Faces Profit Plunge Amid US-China Trade War

Chinese e-commerce giant PDD Holdings, the parent company of the popular shopping platform Temu, has reported a staggering 47% drop in net profit for the first quarter of 2025. The Shanghai-based company disclosed a net profit of 14.7 billion yuan (US$2 billion), nearly half of what it earned in the same period last year, as escalating trade tensions between Beijing and Washington take a heavy toll on its operations.

The profit slump comes in the wake of recent policy changes by the US government, including the scrapping of a customs exemption for goods valued under $800 by President Donald Trump last month. This move has significantly impacted PDD Holdings' business model, which relies heavily on low-cost imports to attract consumers in the US and other international markets.

In a statement accompanying the earnings release, co-chief executive Lei Chen highlighted the company's efforts to navigate these challenges. He noted that PDD Holdings has made substantial investments to support merchants and consumers while adapting to the rapid changes in the external environment, including new tariffs and trade barriers.

The impact of these trade disputes is evident in the market's reaction, with US-listed shares of PDD Holdings plummeting over 13% on Tuesday following the announcement. Analysts suggest that the ongoing trade war could continue to squeeze the company's margins as it grapples with higher costs and restricted access to key markets.

Despite the setbacks, PDD Holdings remains a major player in the global e-commerce space, with Temu gaining popularity for its affordable products. However, the intensifying standoff between the economic superpowers poses a significant risk to its growth trajectory, forcing the company to rethink its strategies.

As trade tensions linger, other nations, including Japan and the EU, are also considering similar measures to impose taxes on small parcels from China, further complicating the landscape for companies like PDD Holdings. The coming months will be crucial in determining whether Temu's owner can weather this storm and regain its financial footing.