Temu and Shein cut digital ad spend as shipping costs rise

Two of China’s biggest e-commerce players, Temu and Shein, have significantly reduced their digital ad spending this month, with performance marketers reporting noticeable drops in ad placements across major platforms. The reason? A looming change to US trade policy that will make cheap shipping from China less viable.

For years, both Temu and Shein have relied on ultra-low-cost delivery and aggressive online advertising to flood Western markets with fast fashion and budget goods. But the recent move by the Trump administration to revisit the Section 321 rule – which allows packages under $800 to enter the US duty-free – has forced both companies to rethink their growth playbook.

With the economics of free shipping at risk, digital marketing is no longer an endless funnel. And that has big implications not just for the brands themselves, but for the broader affiliate and performance marketing industries that have fed off their massive budgets.

Why Temu and Shein mattered to digital marketers

Temu and Shein are not just big e-commerce players. They are some of the biggest digital ad buyers in the world.

Temu, backed by PDD Holdings (the parent company of Pinduoduo), has been one of the most aggressive new entrants to the US retail market. Its launch was supported by a surge in app install campaigns across Facebook, TikTok, and YouTube — many of them with performance-based structures.

Shein has also been a fixture in the affiliate and influencer world, offering fast payouts, regular promotions, and evergreen campaigns that appeal to both micro-creators and large publishers.

Their playbook was simple: undercut Western retailers on price, deliver goods straight from China, and pour millions into acquisition to drive downloads and clicks.

But that model relies on the assumption that shipping stays cheap and duties stay low. If that changes, so do the margins — and so does the marketing spend.

The Section 321 problem

At the centre of this shift is the Section 321 exemption, which allows individual packages valued under $800 to enter the US without tariffs or customs duties. Originally designed for personal imports and small shipments, it’s become a loophole exploited by global e-commerce companies.

Temu and Shein ship millions of small parcels directly to consumers — bypassing traditional warehousing and minimising import costs. But the US government has been under increasing pressure from domestic retailers and trade bodies to close that gap.

If the rule changes, Temu and Shein would face higher costs on every order — forcing them to either raise prices, absorb the margin hit, or reduce other expenses. And in recent weeks, it seems they’ve chosen to cut back on digital marketing.

What this means for affiliate marketers

Temu and Shein have been a major source of revenue for many affiliates, particularly those in cashback, coupon, influencer and shopping comparison models. Their conversion rates were high, their product ranges were wide, and their commissions were fast.

Now, with budgets being pulled back, those opportunities are shrinking.

Affiliates who relied heavily on Temu or Shein campaigns are already seeing fewer creatives, less spend, and in some cases, paused offers. This is a reminder that tying too much of your strategy to one advertiser — especially one with an uncertain regulatory future — is risky.

It also opens the door for other advertisers to step in. Brands in the same verticals may find their CPCs drop as these giants step back from the auction. And for affiliate programmes with physical goods and faster delivery from local warehouses, this is a rare window to compete on visibility.

Is this a temporary pause or a permanent shift?

That’s the question everyone is asking. Temu and Shein are not about to disappear. They’ve built huge audiences, and their apps remain among the most downloaded in the US and UK.

But their business model is under pressure. Governments across the US and Europe are looking more closely at trade loopholes, tax avoidance, and supply chain transparency. What was once a growth advantage is now a potential liability.

In the short term, this may just be a reset — a way to reduce burn while awaiting policy clarity. In the long term, we may see these companies shift to hybrid models, with local fulfilment centres and new pricing strategies that better align with regional costs.

Either way, the days of unchecked ad spending are over. Performance marketers should adjust expectations accordingly.

What happens next?

For now, expect continued uncertainty. Affiliates should diversify, agencies should manage client expectations, and platforms may need to look elsewhere for high-spend advertisers.

But this also highlights a bigger shift in digital marketing — where geopolitics, policy, and logistics are starting to shape performance outcomes just as much as creative or targeting.

Temu and Shein rewrote the rules of acquisition with scale, speed, and spend. Now they’ll need to rewrite them again — and the rest of the industry will be watching closely.