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Chinese e-commerce giants Tem and Sheen have significantly cut US spending on advertising platforms as they wrestled with the end of tax exemptions that supported rivals such as Amazon.
According to estimates from Market Intelligence Group Sensor Tower, Temu cut spending on platforms such as Meta, X and Alphabet YouTube by an average of 31% over two weeks.
Smarter e-commerce data also revealed that Temu has x all spending on Google’s shopping platform since April 9, when widespread Chinese tariffs were introduced.
The ad pullback by two retailers who have grown rapidly in the US since the Covid-19 pandemic at the expense of competitors, including Amazon, shows the widespread impact of President Donald Trump’s trade dispute with China.
The move could hurt social media platforms, including Meta, providing advertising space for Chinese sellers and reaching western viewers.
Temu and Shein were impacted by the White House decision last week to raise their duties for low-value packages arriving from China, 90% of the value of the parcel, or flat rates ranging from $75 to $150. The move, which comes into effect on May 2, ends the “minimum” exemption that allows items under $800 to be shipped tax-free to American customers.
Western rivals have criticized both companies for covering up and selling substandard products.
“The decision to close the minimal loophole was like a targeted weed killer,” said Mike Ryan, an analyst at Smarter Ecommerce.
According to the Analytics Company Consumer Edge, Temu and Shein have spent billions of dollars on US ad blitz in recent years, but they still own less than 1% of the country’s e-commerce market.
According to financial disclosures, Meta revenue from China was more than 10% of $18.4 billion last year, or more than $165 billion in total. In January, he cited tariffs or trade disputes as potential risks to the business, saying it generated “meaningful revenue from a small number of resellers serving China-based advertisers.”
The two retailers are currently being pulled back. Data from Sensor Tower shows that average daily spending across Meta, Tiktok, YouTube and Pinterest fell 19% in the first two weeks of April. They have cut ad dollars in particular from YouTube, and have almost halved their spending, especially from YouTube.
Temu has risen so dramatically over the past year that it has surpassed the 2024 level despite recent declines. Temu was the top advertiser for Elon Musk’s X in the US in 2024.
Meta and X declined to comment. Google, Temu, and Shein did not respond immediately to requests for comment.
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James McDonald, director of data intelligence and forecasting at Marketing Intelligence Company Warc, said that ad cuts will impact sales as both companies lacked sufficient brand loyalty. “They need to promote them all the time to keep their customers.”
According to a 2023 Congressional Report and US Customs Data, the companies were responsible for more than 30% of the small tariff-free cargo of nearly 1.5 million people to the US.
The obligation for the low value package is still lower than the duties on Chinese imports, so it can be up to 125%.
