Temu Parent PPD’s Profits Fall 38% Amid Tariff Pressures

The parent of Chinese eCommerce giant Temu said tariffs helped eat into its quarterly profits.

PDD Holdings attributed this 38% year-over-year decline in the first quarter of 2025 to a variety of factors, as it released its earnings report Tuesday (May 27).

For example, Chairman and co-CEO Lei Chen said during an earnings call that there has been an intensification of competition in China’s eCommerce space.

“As a third-party marketplace, we face inherent limitations when it comes to passing on policy incentives to consumers, which put our merchants at a clear disadvantage compared to our competitors that have a first-party business,” Chen said.

Although this issue had been discussed last year, the challenge remains because of limitations in the company’s capabilities, he said during the call.

“And second, in our global business, radical change in the external policy environment, such as tariffs, has created significant pressure for our merchants, who often lack the capability to adapt quickly and effectively,” Chen said.

Thirdly, since the second half of 2024, the company has “significantly expanded” its fee reduction plan for merchants. This year, it has become clear that merchants need help, leading the company to launch an even more expanded version of that program, he said during the call.

Investments such as these “weighed on short-term profitability but gave merchants the room to adapt and focus on high-quality, sustainable growth, strengthening the long-term health of the platform,” Chen said.

U.S. tariffs on products sourced from China have led Temu to take measures such as rethinking its supply chains and stopping shipping products directly from its home country.

Meanwhile, the PYMNTS Intelligence report “The Enterprise Reset: Navigating Tariffs, Supply Chain Shifts and Cost Pressures” found that more than 90% of medium-sized companies in the United States expect material shortages or shipping delays because of tariff impacts.

Unlike their bigger counterparts, these firms tend to lack the geographic diversification and bargaining power that can protect multinationals from trade shocks. They also face different challenges than small businesses, which have leaner operations and can pivot more quickly.

“Caught in the middle, these companies have historically relied on stable global supply chains and predictable trade relationships to maintain competitiveness,” PYMNTS wrote Tuesday. “With tariffs disrupting that balance, these firms are now rethinking long-held assumptions.”