but in the process all their customers will have been burned buying something from Temu and many will be wary of buying in the future even if the tariff situation improves etc?
Since 2021 foreign merchants can send the goods tax paid, they collect the VAT and send it to to EU country, so there's no fees at customs. It works perfectly fine, but many people don't realize it or don't trust this.
I guess the intent was to let local shops compete with AE, and they succeeded, because the prices are much more in line with the local market, I just miss all the cheap stuff :P