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An Amazon delivery van parked in front of the company’s headquarters campus and The Spheres in Seattle. (GeekWire Photo / Kurt Schlosser)
Amazon and its wide network of third-party retail partners could be disrupted by President Trump’s additional tariffs on goods from China.
Just how much, though, is unclear.
The new 10% tariff on Chinese goods went into effect this week, following a separate 10% hike last month.
A report from analysts at Morgan Stanley last month said Amazon’s first-party business has the highest exposure to China tariffs among e-commerce companies the firm tracks, including eBay, Chewy, and Etsy. The firm estimates that about 25% of the cost of goods sold directly by Amazon come from China.
If tariffs drive up costs, Amazon must decide whether to absorb those costs or pass them on to consumers.
(Chart via Morgan Stanley)
Scott Devitt, an equity research analyst at Wedbush, said he doesn’t think Amazon is uniquely exposed to the tariffs given its ability to find merchandise from outside of China.
“Tariffs in general aren’t great for retail but Amazon is more nimble than many peers to be able to adjust,” he told GeekWire this week.
Amazon’s third-party sellers also face challenges with the tariff increases.
Saul Wolhendler, CEO of toy maker Flybar, which sells on Amazon, criticized the tariffs in a LinkedIn post on Wednesday, writing that retailers are backing out of orders ready to ship.
“When you announced a 10% tariff, we scrambled. We pushed back on factories, negotiated concessions, and worked with retailers,” Wolhendler wrote. “But then, without warning, you raised it to 20%. How can any company absorb a 20% cost increase? Most consumer product businesses don’t even have a 20% EBITDA margin.”
More than 60% of Amazon’s e-commerce sales come from third-party sellers — many of whom source products from China.
Devitt said those merchants also have similar flexibility to source outside of China and avoid the new tariff hike.
Trump also planned to eliminate a “de minimis” rule that exempted international shipments valued at $800 or less from U.S. tariffs, but paused the repeal last month.
Keeping the rule in place could benefit Amazon’s China-based competitors such as Shein and Temu — discount online shopping platforms that ship directly to consumers, bypassing traditional bulk shipments to warehouses. Both companies are gaining U.S. e-commerce market share.
Prices of consumer goods are expected to rise with the new tariffs on China, along with Mexico and Canada. That’s on top of U.S. consumer sentiment dropping to a 7-month low in February.
In response, China this week imposed tariffs on American food imports.
Amazon did not respond to an inquiry from GeekWire about impacts to its business from tariffs.
