SHANGHAI/NEW YORK (Reuters) -Daily U.S. users of PDD Holdings' ( PDD ) global discount e-commerce platform Temu fell by 58% in May, according to market intelligence firm Sensor Tower, one of many headwinds the e-retailer is facing amid a U.S.-China trade war.

Temu decided to slash ad spending in the U.S. and shift its order fulfilment strategy after the White House on May 2 ended the practice known as "de minimis" - which allowed Chinese companies to ship low-value packages to the United States tariff-free.

Temu, along with fast-fashion giant Shein, had utilised that provision for years to drop-ship items directly from suppliers in China to consumers in the U.S., keeping prices low.

Both Temu and Shein have suffered a sharp drop in sales growth and customer growth rates since U.S. President Donald Trump announced sweeping trade tariffs, according to data collected by consultancy Bain & Company, but Temu's trends have been worse than its rival.

Tariffs forced both platforms to raise prices, but Shein has been able to increase the amount of money spent per customer compared to a year ago, the data showed, while Temu has struggled.

Temu did not respond to a request for comment on the drop in U.S. daily users or the headwinds it faces in the U.S. market. 

Engagement on Temu has dropped significantly following the end of the exemption, Morgan Stanley equity analyst Simeon Gutman said in a May note. 

"While the tariff environment is uncertain, if the status quo remains for an extended period, we believe Temu's competitive threat will continue to weaken," Gutman said. 

Last week, PDD's first quarter earnings fell short of growth estimates and executives told analysts on a post-earnings call that tariffs had created significant pressure for its merchants.

They reiterated Temu's earlier pledge to keep prices stable and work with merchants across regions, referring to a shift to a local fulfilment model announced at the start of May. 

Temu's previous business model gave merchants responsibility for ordering and supplying their products while the China-based company managed most of the logistics, pricing and marketing. 

Now, Temu's merchants "can ship individual orders from China to Temu-partnered U.S. warehouses but they would need to address tariffs and customs charges and paper work," according to a note from analysts at HSBC. Temu continues to handle fulfilling orders close to shoppers, setting prices and online operations. 

In last week's note, HSBC said that Temu's growth in non-U.S. markets has picked up, with non-U.S. users rising to 90% of its 405 million global monthly active users in the second quarter.

"New user uptick grew swiftest in less affluent markets," analysts wrote.