PDD Holdings Inc, the Chinese parent of popular bargain online seller Temu, said its profit dropped nearly 50% in the first quarter, as a drastically different tariff environment in the U.S. added to challenges at home.

The company's shares fell 14% in Nasdaq trading Tuesday.

With President Trump in the White House, PDD faced a major setback in its global ambitions, as Temu, whose ultracheap everyday items have been a hit with budget-conscious U.S. consumers, faced not just new U.S. tariffs but also the disappearance of a duty exemption for low-value packages from China.

Over the past few years, Shanghai-based PDD had been a bright spot among Chinese e-commerce companies with its low-cost products attracting bargain hunters in China and disrupting markets around the globe. But in recent quarters, economic slowdown and intensifying competition in China had started to hurt its outlook. Temu also started facing increasing pushback overseas, particularly in the U.S.

Workers in a Guangzhou clothing factory produce garments.

On Tuesday, the company's leadership highlighted the need to brace for the uncertain times. PDD's 10% rise in first-quarter revenue, to the equivalent of $13.18 billion, was its slowest revenue growth since the first quarter of 2022. Net profit slid 47% to $2.03 billion, it said, widely missing the forecast of analysts polled by FactSet.

PDD doesn't break out revenue for Temu. The bulk of PDD's sales come from China, analysts say.

An escalation in trade tensions between the U.S. and China has in recent months cast a shadow over PDD's business in the U.S. and forced it to shift its global strategy.

Temu and its China-founded rival, Shein, both have relied heavily on the tariff exemption for small packages. In response to the exemption's end for packages from China in early May and new Trump tariffs, Temu raised prices and temporarily halted all shipments from China.

The company now gives priority to local fulfillment, relying on items that have already been imported to the U.S. in bulk and are sitting in U.S. warehouses, and trying a similar concept as it faces pushback in other overseas markets, including the European Union, which has proposed a universal fee on packages from China delivered directly to consumers.

But the approach means Temu will lose much of its price advantage to competitors such as Amazon.com.

Temu website homepage.

After Beijing and Washington reached a 90-day trade truce, Temu resumed some shipments from China. But the tariff reprieve is temporary and it is unclear whether PDD can adapt with the times.

"No matter how policies shift, we'll continue to strengthen our operations in the markets we serve, helping more local merchants grow on our platform and enabling more orders to be fulfilled from local warehouses," PDD Chairman Chen Lei said in a Tuesday call with analysts.

Citi analysts said in a note earlier this month that there has been a notable decline in Temu's U.S. sales since April. Citi has cut 2025 and 2026 revenue forecasts for the retailer by 0.6% and 2.3%, respectively, citing scaled-back sales in the U.S., as well as PDD's shift toward the local-fulfilment business model.

Domestically, PDD is wrestling with a harsher environment. Its Chinese e-commerce site Pinduoduo grew rapidly after launching in 2015, hurting stalwarts Alibaba Group and JD.com badly. But Alibaba and JD.com have both ramped up efforts to defend their market shares and national subsidies aimed at spurring consumption this year have benefited its rivals more, said Vinci Zhang, an analyst at research and analytics firm M Science.

Chen told analysts the overarching factor contributing to the first-quarter profit slide was the expanded subsidy initiative.

PDD plans to invest more than $13 billion over the next three years to support its merchants.

Much of the Tuesday earnings call was dominated by management's pledge to support and retain merchants, who had in the past few years expressed resentment about being squeezed hard by the company.

As a result, "our profitability is likely to face challenges in the near term and potentially in the longer term," Liu Jun, PDD's vice president of finance, said on the call with analysts.