Investing

Trump Tariffs Slam TEMU Stock- Is PDD in Free Fall?

Chris MacDonald

Published: February 2, 2025 10:00 pm

Among the tech stocks most in focus heading into this headline-filled week is Temu parent PDD Holdings (NASDAQ:PDD). Shares of the Chinese e-commerce giant have continued to be among the more volatile U.S.-listed Chinese stocks, with PDD’s stock price plunging roughly 30% in a single day this past year on worse-than-expected earnings in the second quarter.

Heading into a Monday that’s expected to be a bloodbath in the markets, after president Trump confirmed 10% tariffs would be placed on China (with Canada and Mexico being slapped with across-the-board tariffs of 25%, outside of energy products), many investors may be looking for companies to rotate out of (or short) amid what could be some violent volatility in the markets.

Key Points About This Article:

• Temu parent PDD could be poised for a rather significant selloff tomorrow, following the announcement that Trump will be putting forward tariffs.
• The question investors will be likely asking this coming week is whether this selling pressure will continue, or if the stock can roar back.
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Look Out Below

Past performance is no guarantee of future gains (or losses), but looking at the historical volatility Temu’s parent company has seen over the past year on negative headlines, I do think investors have something to be concerned about heading into tomorrow.

As mentioned, PDD’s stock price nosedived after disappointing Q2 earnings, with the e-commerce giant bringing in only $13.6 billion of revenue in the quarter (compared to expectations of more than $14 billion), driven by growing concerns around saturation in the Chinese e-commerce space via other giants. The Temu and Pinduoduo parent competes with the likes of JD.com, Alibaba and Shien for market share. Among American consumers, competition for low-priced goods remains high, with many using third-party companies to search all available sites for the best prices.

With tariffs likely to raise the cost of these ultra-low-cost items consumers have gotten used to purchasing on Temu (or one of its competitors’) websites, the question is whether future quarters may show a growth rate that’s slowing much faster than many thought possible.

Growth May Be Harder to Come By, and Investors Could Be Switching Their Focus

In the post-pandemic era characterized by near-zero interest rates and global central banks that were encouraging as much investment and spending as possible, growth was all that mattered. Companies that could show near-triple-digit growth rates were being rewarded with higher and higher valuations. And despite geopolitical concerns holding back many U.S.-listed Chinese stocks, PDD has been a relatively decent performer in recent years, all things considered.

It’s also worth noting that after the company’s previous Q2 crash, the stock almost immediately rebounded to pre-earnings levels, before giving up those gains in recent weeks. So, maybe there’s a case to be made that this company could be one to buy on the dip in the coming days.

The thing is, if these tariffs are kept on the books longer than the market anticipates (many thought tariffs would be used only as a negotiating tool), it’s possible that this week’s decline in PDD stock (and I’m assuming it will be a rather steep decline) could just be the beginning of a dark chapter for this company.

We’ll see. For now, I think there’s good reason why some investors are clearly piling into risk-haven assets in a bid to wait out whatever volatility may be ahead. Right now, the storm clouds do appear to be accumulating, at least for this particular Chinese e-commerce giant.