PDD Holdings, the Chinese tech giant and parent company of Temu, saw its net profits fall by nearly half (47%) in the first quarter of the year, as the company braced for escalating trade tensions between Beijing and Washington.

The Shanghai-based firm reported net income of 14.7 billion yuan ($2 billion) for the quarter ending March 31—down 47% year-on-year.

The sharp decline in profits comes amid renewed trade friction between the world’s two largest economies. Last month, U.S. President Donald Trump revoked the tariff exemption for goods under $800 in value, a critical element of the business model for platforms like Temu that rely on low-cost exports.

In a statement accompanying the earnings release on Tuesday, PDD Holdings co-CEO Lei Chen said the company made “substantial investments... to support merchants and consumers” and to adapt to “rapid shifts in the external environment.”

“These investments impacted short-term profitability but gave merchants room to adjust,” he stated, adding that the company remains focused on “strengthening the platform’s long-term health.”

PDD also reported slowing revenue growth for the fourth consecutive quarter. First-quarter revenue rose 10% year-on-year to 95.7 billion yuan—significantly lower than the 24% growth recorded in the previous quarter and a steep drop from the 131% surge seen in early 2024.

The slowdown was “expected,” said PDD’s Vice President of Finance Jun Liu, adding that it was “accelerated by changes in the external environment.” She also warned that the company’s financial results “may continue to reflect the impact of ongoing investments during uncertain times.”

Following the report, PDD’s New York-listed depositary shares dropped more than 13%.

As part of the latest downturn in the US-China tariff standoff, Trump signed an executive order this month imposing duties on “de minimis” items shipped through the U.S. Postal Service—setting tariffs at 54% of their value or a flat $100 fee. The previous duty had been set at 120%.