Snap shares sold off Wednesday after the company cited potential advertising troubles once the de minimis exemption closes in its earnings report. Although the company posted a 14% increase in total revenue, the company yanked its second-quarter guidance due to an uncertain macroeconomic environment.
Social media platform Snap shares plummeted as much as 16.9% Wednesday after it pinned potential headwinds on a soon-to-shutter tariff loophole that could negatively impact Snap advertisers who rely on it for e-commerce sales.
A threshold called the de minimis exemption allows goods valued at less than $800 to enter the U.S. duty-free. Chinese companies that benefit from the de minimis exemption like Shein and Temu have already raised their prices as much as 377% and 150%, respectively.
“We’re still growing, but we’ve seen some headwinds for our top-line growth so far,” chief financial officer Derek Andersen said during Snap’s earnings call. “As one example, we’ve heard from a subset of advertisers that their spending has been impacted by the changes to the de minimis exemption.”
While President Donald Trump’s trade policy has battered the stock market, an early snapshot into the cascade effect of Trump’s tariffs comes this week as major tech companies like Meta and Microsoft report earnings. Meta fell slightly, losing less than 1% Wednesday, while Microsoft gained 0.31% on the day. Both companies soared more than 5% in after-hours trading.
Despite posting positive Q1 results, Snap pulled its Q2 guidance citing an uncertain macroeconomic environment impacting advertising revenue, its most substantial revenue driver. The company’s ad revenue climbed 9% year over year during the quarter, reaching $1.21 billion.
Additionally, Snap boasted a 14% year-over-year increase in total revenue to $1.36 billion “driven by the progress we have made with our direct-response advertising solutions,” the company said in its investor letter.
The Trump administration plans to close the exemption for low-value imports from China on Friday as the country bears a 145% levy on exports into the U.S.
In terms of the elimination of the de minimis exemption, Andersen emphasized caution because “it’s just really difficult to parse the drivers between various potential factors there.” Regardless, Snap stock plummeted as much as 16.9% Wednesday before closing down 12.43% .
Snap declined Fortune’s request for additional comment.
“While [price-to-sales ratio] is nearing a historical bottom and could support stock, we reiterate our neutral rating as Snap has been pressured more than peers in prior macro downturns,” Bank of America analyst Justin Post said in a note obtained by Fortune.
This story was originally featured on Fortune.com
