Amazon CEO warns customers that Trump’s tariffs are forcing third-party sellers to “pass the cost on”
Amazon customers could see prices tick up as tariffs over 100 percent on goods from China cut into vendor margins.
This year Amazon’s stock price has fallen by 16 percent. As the scale of the White House’s plan on tariffs goes into effect, the e-commerce giant’s CEO is warning that they expect consumers will likely face higher prices.
Many sellers on Amazon depend on imports from China
Many products sold on Amazon are imported. ECDB, a market analytics firm, reported that around 70 percent of the goods sold on the platform come from China. Currently, 145 percent tariffs have been imposed on imports from China by the Trump administration.
High
Amazon CEO warns that higher prices could come as tariffs over 100 percent on China take effect
On Thursday, April 10, Amazon CEO Andy Jassy said his company was working to evaluate the impact that tariffs, particularly those on China, would have on their customers. In an interview with CNBC’s Andrew Ross Sorkin, Jassy spoke to the reality for many third-party sellers that use Amazon, expecting many to “pass that cost on” to avoid higher tariffs impacting their margins. And this is not the minority of products. Sales from third parties account for 60 percent of products sold, a number that has increased as the company has launched other revenue-generating branches (Prime Video, Audible, Kindle, Amazon Web Services, to name a few).
It’s all about the margins of the seller, explained Jasssy. The margins for selling products imported from China to a person in the US will be much smaller than a customer in a low-tariff market.
With the tariff applied to China over 100 percent, the question on the minds of many is: what kind of margins were companies obtaining before the policy went into effect?
A local business that uses Amazon to sell its products online might make just enough to pay itself and its employees. If they reduce their margins and take a pay cut to reduce the cost increase for their customers, there are still negative economic effects that begin to take place. An Amazon vendor that chooses to pass along the price increase is reducing the purchasing power of their customers, while if they absorb them, they may have to resort to lowering their own buying power by lowering their income. Either way, fewer goods are going to be consumed.
For a larger company, like Amazon and Walmart, the margins are much higher, meaning they might be able to weather a short-term decrease in profits that pushes smaller sellers out of the market. Walmart put out a release this past week about how they did not think the economic environment would impact their ability to deliver for consumers.
The push and pull of what margins can be sacrificed will depend from company to company, and small retailers on Amazon could see their margins fall considerably and threaten the viability of their business.
Get your game on! Whether you’re into NFL touchdowns, NBA buzzer-beaters, world-class soccer goals, or MLB home runs, our app has it all.
Dive into live coverage, expert insights, breaking news, exclusive videos, and more – plus, stay updated on the latest in current affairs and entertainment. Download now for all-access coverage, right at your fingertips – anytime, anywhere.