PDD Holdings Inc. ( PDD ) shares are moving lower Wednesday as the company faces increased scrutiny from U.S. regulators and new trade restrictions that could impact its business model.

What To Know: The decline potentially follows a broader sell-off earlier in the week after President Donald Trump announced new tariffs and closed a key trade loophole. Trump’s order eliminates the “de minimis” exemption, which allowed shipments under $800 to enter the U.S. duty-free. Temu and its rival Shein have relied on this exemption to offer low prices and expand their U.S. market share.

Analysts warn that the removal of de minimis could increase costs for Temu and force it to scale back aggressive pricing strategies. Bank of America analysts noted that Temu and Shein have been major contributors to Meta's advertising revenue, and higher costs could lead to a pullback in digital ad spending. Citi analysts estimate that Temu's U.S. local warehouse operations, which could help mitigate tariff risks, only accounted for about 20% of its gross merchandise volume by the end of 2024.

With regulatory pressure mounting and the loss of a key cost advantage, investors are reacting to the uncertainty surrounding Temu's ability to sustain growth in the U.S.

PDD Price Action: PDD shares were down 3.27% at $110.39 at the time of writing, according to Benzinga Pro.

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