Shares in PDD Holdings, the Chinese parent company of the online shopping platform Temu, dropped more than 13% on Tuesday after the company reported a sharp 47% decline in quarterly profits. The firm’s earnings fell to 14.74 billion yuan ($2.05 billion, £1.5 billion) in the first quarter, highlighting the impact of shifting trade policies and fierce competition at home.

The profit slump coincides with a series of escalating trade measures from the United States. Earlier this month, the Trump administration ended the "de minimis" rule, which had allowed imports under $800 to enter the US without duties. This policy shift hit Temu and fellow fast-fashion giant Shein particularly hard, as both had relied on this exemption to sell and ship inexpensive goods directly to US consumers.

In response to the new tariffs—reportedly as high as 120%—Temu announced it would cease direct shipments from China to US buyers. The company’s chairman, Chen Lei, attributed the profit decline to “radical changes in external policy environments such as tariffs,” and acknowledged that the trade war had placed “significant pressure” on the merchants using its platform.

While a temporary easing of trade tensions led to a 90-day reduction in US tariffs on small packages, the relief may be short-lived. At the same time, Temu and its rivals are encountering growing scrutiny in Europe and the UK.

The European Union has proposed a flat €2 fee on each low-value parcel sent directly to customers’ homes, a move aimed at leveling the playing field for local retailers. Similarly, the UK government has signaled a review of how it treats low-cost imports, following rising complaints from domestic businesses.

Domestically, PDD Holdings is engaged in an ongoing price war with competitors like Alibaba and JD.com, all of whom are battling sluggish consumer spending in China. This combination of international headwinds and local competition has left the company navigating one of its toughest periods to date.