Google Faces Losing Temu and Shein Ad Revenue Due to China Tariffs
While many companies grapple with economic fallout from the Trump administration’s global tariffs, Alphabet (GOOGL), Google’s parent company, has so far avoided major impact thanks to a business model that doesn’t depend on physical goods. The tech giant surpassed expectations in the first quarter of 2025, reporting a 12 percent year-over-year revenue increase to $90.2 billion and a 46 percent profit jump to $34.5 billion.
Still, Alphabet isn’t immune. “We’re obviously not immune to the macro environment,” said Philipp Schindler, Google’s chief business officer, on the company’s earnings call yesterday (April 24). He added that it’s “really too early to comment” on how tariffs will affect ad spending, but acknowledged that the recent elimination of a key trade exemption could pose problems.
That is the “de minimis” exemption, which had allowed goods valued under $800 to enter the U.S. duty-free. But under an executive order signed in April, these goods will be subject to a 30 percent duty or $25 flat fee per item starting May 2. The move is expected to reduce U.S. ad spending by Chinese e-commerce giants like Temu and Shein.
“Changes to the de minimis exemption will obviously cause a slight headwind to our ads business in 2025, primarily from APAC-based retailers,” Schindler said.
Temu is already reportedly scaling back its ad spending in the U.S. Retailers account for roughly 21 percent of Google’s ad revenue, according to Oppenheimer & Co.
For now, Google’s ad business remains strong, bringing in $66.8 billion in the first quarter—an 8.5 percent increase from the same period last year.
Alphabet’s other divisions also posted gains. Google services—including Search, Chrome, and YouTube—generated $77.2 billion in revenue, up 10 percent. Google Cloud sales rose 28 percent to $12.2 billion. The Other Bets division, which includes Waymo and Wing, brought in $450 million, down from $495 million a year ago. Alphabet shares are up over 1 percent today.
Google stays the course on A.I. spending
Despite economic uncertainty, Google is forging ahead with A.I. investments. Capital expenditures hit $17.2 billion in the first quarter, a 43 percent increase year-over-year, and the company reaffirmed plans to spend about $75 billion in total for the year.
A.I. Overviews, which generates search summaries, now serves 1.5 billion users monthly, said CEO Sundar Pichai. “We are leaning in heavily here,” he told analysts, adding that the feature is expanding to new countries, users and queries. Last month, Google rolled out an expanded version of A.I. Overviews known as A.I. Mode, a more advanced version designed for complex queries.
Internally, the company is also scaling A.I. usage. In October, Pichai noted that one-quarter of new code included A.I.-generated suggestions. That figure is “well over 30 percent now,” he said.