It's unfortunate but seems like this time, consumers are acting rationally and going for the lowest price possible on the commodities TEMU sells.
I didn't notice any bad effects - although it likely reduced online sales since prices went up by 15% for goods < $600.
Import duties are levied by the Federal government. Temu's customers are exempt because their orders are under the de minimis limit.
Technological progress has allowed massive amounts of what are essential non-existent packages to just blast through the system. We are in new territories, and it is maybe time that the rules became updated.