President Donald Trump's plan to hike tariffs and suspend the 'de minimis' exemption on import fees could drive some advertisers, particularly Chinese e-commerce firms, to pull back on spending, analysts said Monday. But Facebook parent Meta Platforms stock rallied despite the potential hit to a fast-growing segment of its digital advertising sales.
Trump signed an executive order Saturday imposing 25% tariffs on products from Canada and Mexico, while raising tariffs on Chinese goods by 10%. The tariffs are due to be enacted on Tuesday. The order also reportedly suspends the de minimis exemption in U.S. trade policy, which allows packages valued at $800 or less to enter the U.S. duty-free. (Mexican President Claudia Sheinbaum said Monday that Trump agreed to delay tariffs on Mexico for a month, after a telephone conversation in which both leaders agreed to take joint measures to fight fentanyl trafficking).
De minimis shipments have grown significantly with the popularity of discount online shopping platforms Temu and Shein, which ship products directly to American consumers from merchants in China.
A key part of Temu's growth, as well as Shein's, has been advertising on Facebook and Instagram, and through Google.
"A suspension of the de minimis exemption poses a risk to ad spend from Chinese e-commerce platforms like Temu and Shein," BofA Securities analyst Justin Post told clients Monday. "With the exemption removed, their growth could be significantly constrained, potentially leading to cuts (in) marketing budgets."
What Is The De Minimis Exemption?
Under the so-called de minimis exemption, U.S. trade law allows packages valued at $800 or less to enter the U.S. without paying tariffs. The more than 90-year-old provision has come under greater scrutiny in the past two years, as Chinese e-commerce companies have contributed to rapid growth for the imports.
There were 1 billion de minimis shipments in the third quarter of 2024, according to U.S. Customs and Border Protection data, compared to 640 million total in 2020.
Former President Joe Biden last year proposed limits on which products could qualify for the exemption, though the rule had yet to take effect.
Temu's Estimated Value To Meta
BofA's Post estimated that Temu and Shein represent between 2% and 4% of total ad spending for Google and Meta.
Advertisers from China spending on Facebook and Instagram to reach consumers in other market is a fast-growing business for Meta. Meta's apps are banned in China itself. The tech giant recently disclosed that Chinese advertisers represented 11% of ad revenue for its so-called Family of Apps, compared to 6% in 2023.
Youssef Squali, an analyst with Truist, said Monday that the removal of the de minimis exemption is a "negative for ad platforms." It could also open up an opportunity for other e-commerce platforms to advertise more.
Squali said Etsy, for instance, could benefit from "less competition for advertising space."
That's particularly true in search advertising and social media, he added, "where Temu and Shein drove prices higher and ROAS (return-on-advertising-spend) down for peers in general and Etsy in particular in the last 12-18 months."
Etsy Chief Executive Josh Silverman said late in 2023 that Temu and Shein "almost single-handedly" were driving up the costs of advertising.
There is also a broader risk for digital advertising from the tariffs beyond China e-commerce, BofA's Post added.
"For the U.S. online media sector, if manufacturers and sellers reduce ad spend to offset concerns on rising product costs, there could be a negative impact on sector sales," Post said.
Citing data from eMarketer, Post said that the retail, automotive and electronics categories represent 43% of online advertising spending as of 2024.
Meta Stock Near New Highs After Q4 Earnings
On the stock market today, Meta stock opened lower before recovering. The stock gained 1.2% to close at 697.46. Meta shares have closed higher for 11 consecutive trading days.
On the other hand, shares of Temu parent PDD Holdings lost 6% to close at 105.24. Amazon stock, which launched a discount-focused Temu competitor called Haul last year, closed a fraction lower. Shares of Google parent Alphabet lost 1.4% to close at 201.23.
Meta stock is hovering near record highs. Last week, the social media company posted Q4 results that showed a 50% increase in earnings, to $8.02 per share, while revenue climbed 21% to $48.4 billion.
Meta has gained roughly 17% so far this year after rallying 70% in 2024.
Meta is also an IBD Leaderboard stock.
