Shein and Temu Face Tougher Times in the U.S. That’s Good News for Amazon.

Shein has recovered at a faster pace than Temu after the U.S. revoked the de minimis tax exemption. Above, a Shein logistics center in Guangdong Province, China (Qilai Shen/Bloomberg.)

Shein and Temu, the China-founded e-commerce companies, have been hurt by the Trump administration’s move to end a trade policy integral to their business model.

The companies have seen sharp declines in sales, app downloads, and app users since they effectively lost the ability in May to ship their products to the U.S. duty free. The setback is likely to benefit competitors such as Amazon.com, Walmart, Gap, and TJX , owner of TJ Maxx, all of which could regain some market share previously lost to Shein and Temu.

The Trump administration announced in April that it would end the de minimis exemption for all packages shipped to the U.S. from China and Hong Kong, alleging shippers based in China were using the loophole to ship illicit substances to the U.S. The exemption allowed imported goods valued below $800 to enter the country without incurring duties or undergoing formal customs oversight.

Critics had accused companies such as Shein and Temu of abusing the policy by shipping the bulk of their merchandise from China in packages that fell under the threshold, allowing them to sidestep tariffs and keep prices lower than competitors.

Shein, which is based in Singapore and is privately held, primarily sells clothing and accessories. Temu, a unit of China’s PDD Holdings , carries a wider array of products, including housewares and electronics. Both companies have disputed claims that they are purposely abusing the exemption, and that their low prices are dependent on de minimis.

Shein executives have attributed the website’s low prices to the company’s “on demand” model: Shein says it uses real-time user activity on its app to determine what is selling, and makes more of popular item in small batches, negating the need to invest heavily in inventory.

De minimis has played a role in fueling both companies’ growth. The number of shipments entering the U.S. claiming the exemption increased by more than 600% from 2015 to 2023, according to Customs and Border Protection. In 2024, the agency processed more than 1.3 billion de minimis packages, many mailed from China and Hong Kong by e-commerce sites such as Shein and Temu.

Both companies reduced their U.S. ad spending by more than 60% in the second quarter of 2025, after the April announcement, redirecting it to other markets, according to data from SensorTower. As a result, both have seen sharply lower U.S. app downloads, digital traffic, and sales since then.

Temu’s U.S. app downloads fell 77% from April to June, and Shein’s were down 51%, according to SensorTower data. Customer concerns about the impact of the de minimis rollback also kept some shoppers on the sidelines.

Temu’s monthly active users fell 49% year over year in July, while Shein’s users were down 3% that month from the prior year, according to SensorTower.

Shein’s U.S. sales, meanwhile, fell 11% year over year in May after de minimis was revoked, while Temu’s nosedived 23%, according to Bloomberg SecondMeasure data. Median observed sales for the broader online-marketplace, or sales derived from credit- and debit-card data, rose 0.9% in the month.

More trouble could be brewing. The end of de minimis means both companies may have to raise prices to offset new duties, narrowing their price gap with competitors. In addition, the administration’s decision in July to end the de minimis exemption for imports from all countries could create processing backlogs that slow Shein and Temu’s shipping times. The combination of higher prices and slower shipping may be a tough sell for shoppers.

“Price matters, but domestic retailers have competitive pricing and much faster delivery speeds,” said Arun Sundaram, an analyst at CFRA Research.

Shein and Temu didn’t respond to Barron’s requests for comment.

Competitors have been vying for an advantage. Companies such as Etsy have increased their online-advertising spending to try to fill the void left by Shein and Temu. “If there’s a visit we can buy profitably and it’s available, we will buy it,” said Etsy CEO Josh Silverman. “So, our marketing spend just expanded to fill that space.”

Etsy’s website got more visibility in Google search afte r the company started spending more on advertising, he said.

Visibility isn’t the only thing up for grabs; so are consumers’ dollars. Some of the same retailers that lost market share to Shein and Temu just a couple of years ago are now poised to win it back.

Fast-fashion and value-focused apparel retailers, such as Zara, Gap, TJ Maxx, Nordstrom Rack, and Old Navy, have seen a recent surge in U.S. active monthly users. The metric for these stores was 103% higher, on average, in June compared with March, SensorTower found.

Given Temu’s merchandise variety, market-share gains by other merchants likely will be spread across the industry, said Ben Parkes, advisory services leader for consumer goods and retail at website-traffic tracking company Similarweb. CFRA’s Sundaram sees companies such as Walmart, TJX, Costco Wholesale , and BJ’s Wholesale reaping an advantage.

The biggest beneficiary of Shein and Temu’s troubles may be Amazon . “What has become abundantly clear is that in the absence of Temu and Shein, Amazon share gains have accelerated,” wrote Lee Horowitz, an analyst at Deutsche Bank.

From March through July, Amazon’s monthly U.S. sales rose at an average annual pace of roughly 9%, according to SecondMeasure data. The company’s U.S. sales jumped 11.6% in July, outperforming the industry and PDD, whose monthly sales growth had outstripped Amazon’s before the de minimis change.

Amazon has been taking market share for decades, although Shein and Temu were a perceived threat to the company. Amazon launched Haul, a copycat business, last November.

Shein and Temu still have a strong U.S. foothold, and are expanding aggressively elsewhere. “I don’t think what’s happening with policy today will be the end of Shein and Temu,” Sundaram said. “There’s still demand for fast fashion and discounters, and they still have competitive prices, even with the end of the exemption.”

Both companies’ global web traffic is rising, despite a temporary dip after the policy changes. Temu’s rose just over 150% year to year in May and June, according to Similarweb, while Shein’s increased 12% in May and 50% in June.

The companies’ U.S. business has begun to stabilize as retailers and consumers navigate the post de minimis environment. Seema Shah, vice president of research and insights at SensorTower, notes that Shein and Temu are ramping up ad spending in the U.S. again, just in time for back-to-school shopping and ahead of the holiday season.

Shein has recovered at a faster pace than Temu. Its U.S. sales rose 12.8% in July, according to Bloomberg SecondMeasure. PDD’s U.S. sales were down 19% that month. Shein’s web traffic, transactions, and monthly active users are also on a better trajectory than Temu’s.

“Shein established itself as a dominant force in a way perhaps Temu hadn’t,” said Michael Gunther, vice president and head of insights at Consumer Edge, a provider of consumer transaction data.

Shein’s focus on fashion may also give it room to raise prices without dinging demand. Gunther notes that although Shein’s price gap relative to fast-fashion competitors has narrowed, it is still big enough to tempt bargain hunters.

Ultimately, Shein and Temu’s fate in the U.S. likely will hinge on their ability to adapt to a more hostile environment. De minimis, while significant, wasn’t the companies’ only growth engine. Their competitive prices, marketing acumen, and understanding of a new generation of consumers helped solidify their position as formidable competitors to traditional retailers.

New strategies focused on onboarding U.S.-based suppliers and relying on U.S. warehouses could help Shein and Temu recalibrate to achieve sustainable long-term growth in the U.S. Until then, competitors see a not-so- de-minimis opportunity to prosper.

Write to Sabrina Escobar at sabrina.escobar@barrons.com