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Investing.com -- PDD Holdings Inc. is facing significant headwinds following the recent US tariff announcements, with Citi analysts predicting its international e-commerce platform, Temu, will bear the brunt of the new measures.
This news has already impacted the market, with PDD stock dropping 3.6% on Thursday.
According to a note from Citi, "PDD’s Temu is likely to be the most impacted by raised tariffs and removal of the de minimis exemption for shipments under US$800."
The de minimis rule, which allowed for tariff-free shipments of goods under $800, is set to be removed in May, creating a substantial obstacle for Temu’s business model.
Citi analysts note "Temu has been shifting its US model to semi-managed models over the past few months, and we believe many sellers have already front-end loaded some inventory and stored it in US warehouses, the worse-than-expected tariff announcement and removal of de minimis exemption could still cause significant uncertainty to the Temu business over time."
Citi’s analysis indicates that companies with a primarily domestic focus within China will be more resilient to the tariffs.
"We believe companies that have a majority of revenue from and businesses based in China will be relatively more resilient and less impacted by the tariffs," the note states.
This is said to put companies like JD.com, Meituan, NetEase (NASDAQ:NTES), TME, TCOM, and Kuaishou in a stronger position compared to PDD.
Furthermore, Citi highlights the broader uncertainties surrounding potential further restrictions on the Chinese tech sector.
"Uncertainties remain regarding whether there could be more restrictions on the tech sector related to chip export and the CMC list," the note warns.
This adds another layer of complexity for Chinese internet companies, particularly mega-cap firms like Tencent (HK:0700), Alibaba (NYSE:BABA), and Baidu (NASDAQ:BIDU), which Citi predicts will "see share price overhang given uncertainty around any potential new chip restrictions."
In conclusion, Citi’s analysis paints a challenging picture for PDD, with Temu’s future facing considerable uncertainty due to the newly imposed tariffs.