Is Temu about to be banned in the United States? If a group of lawmakers have their way, it may be. As Yahoo Finance reports, a group of senators and congresspeople are pushing to have the e-commerce platform added to a list of companies that have violated the Uyghur Forced Labor Prevention Act (UFLPA). News of this development is sending shares of Temu parent PDD Holdings (NASDAQ:PDD) down as the market reacts to the potential ban.
PDD stock has enjoyed significant growth over the past six months as the company has aggressively targeted U.S. buyers. But if this policy proposal progresses, it could severely compromise the firm’s growth prospects.
This isn’t the first time that Temu has attracted attention for negative reasons. Allegations of the app containing Chinese spyware have led to negative speculation around PDD stock. This time, though, lawmakers may be more aggressive about the need for action.
What’s Happening With PDD Stock?
PDD stock hasn’t dipped too much on news of the proposed ban. As of this writing, shares are down only about 2% for the day after an attempted rally. However, trading has been volatile lately, with shares spending more time in the red than the green. Even the boost that PDD stock saw after Temu’s Super Bowl commercials hasn’t been enough to spur any real growth.
PDD Holdings is facing a particularly worrisome challenge as U.S. lawmakers including Rep. Blaine Luetkemeyer (R-MO) pressure the U.S. Department of Homeland Security and other agencies to enact a proposed Temu import ban. Many other politicians have expressed concerns regarding the app as well.
Implemented in 2021, the UFLPA keeps imported goods from the Xinjiang region of China out of U.S. markets. This territory is well-known for forced labor practices. Now, some lawmakers believe further action is needed, alleging that Temu’s suppliers are using forced labor to help produce their cheaply priced goods.
Other Temu Problems
As noted, Temu has been accused of other unethical things before. In September 2023, market research firm Grizzly Research slammed PDD in a short report, alleging that the Temu app contained dangerous malware and spyware that threatened “U.S. national interests.” The scathing case against PDD stock sent shares tumbling, but it didn’t have too much impact on the popularity of Temu. Indeed, the app has exploded in popularity over the past year as shoppers have fully embraced its low prices and user experience.
As Insider Intelligence reports:
“Temu was one of the fastest-growing websites in the US last year, growing its web and mobile traffic by more than 700% YoY, reaching an average of 92.2 million monthly visits, according to Similarweb data cited by Business Insider.”
Some experts have even speculated that Temu could pose a threat to Amazon (NASDAQ:AMZN) if it continues to grow. However, the prospect of ending up on the UFLPA list could stop PDD and Temu in its tracks. Temu won’t be able to keep growing so robustly if it can’t sell to a big market like the United States. And if the ban takes hold in one country, other countries could follow suit.
All told, investors should approach PDD stock with caution, even if no direct action has been taken against the company yet.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
