As President Donald Trump’s trade war escalates, U.S. retailers and consumers alike have braced for impact, strategizing how they will navigate the newly imposed tariffs. With China being the hardest hit by the tariffs, major online retailer Amazon is likely to experience an outsized impact due to the considerable amount of business conducted between Amazon and Chinese suppliers.
Retailers are strategizing how they might offset the tariffs, eyeing increased prices for consumers or searching for alternative suppliers with reduced tariff amounts. With so many retailers leaning on the same strategy, alternative suppliers are likely to experience an unprecedented increase in demand, resulting in increased prices there, as well.
Consumers Are Likely to Foot the Bill
Despite strategies aimed at keeping costs down, most retailers have already signaled that the costs of the tariffs are likely to be passed to consumers. While the Trump administration has argued that foreign governments will pay the tariffs, business owners and economists have found that eventuality to be unlikely in practice. Historically, tariffs ultimately raised the cost of goods for the consumer, as they were not paid by the exporting foreign government.
Impact of Tariffs on Amazon Prices
Amazon CEO Andy Jassy confirmed the likelihood of price hikes during a recent discussion, further contending that Amazon is well-positioned to weather the impact. Jassy observed that there has been some heightened buying that appears to be in anticipation of price increases, noting that most vendors haven’t changed prices yet. Still, Jassy commented that Amazon may be better equipped to offer lower price points than competitors due to greater buying power and extensive reach.
“When you have the broadest selection like we do, and 2 million-plus global sellers like we do, you’re better positioned to help customers find whatever items matter to them at lower price points than elsewhere,” Jassy contends.
Amazon Eyes Potential for Growth
Striking a measured tone, Jassy recognized that while prices are likely to increase due to the tariffs, Amazon will continue searching for the lowest cost items to offer to consumers, viewing the tariffs as a potential growth opportunity for the organization. As rivals are less likely to be able to similarly reduce the costs, Amazon sees itself in the best position to minimize the impact of tariffs on the consumer.
Focusing On Other Price Drivers
During a recent earnings call, Jassy focused on overall pricing rather than any of the potential causes. The CEO maintained that the company would continue to work toward lower prices.
“As always, we’re working to keep prices low. And with this being an uncertain moment for consumers, it’s even more important than it typically is. In Q1, we held deal events worldwide to help customers save over $500 million across the Big Spring Sale in the U.S. and Canada, Spring Deal Days in Europe, and Ramadan/Eid Sale events in Egypt, Saudi Arabia, Turkey, and the UAE,” Jassy stated.
He reiterated additional savings opportunities that would be announced throughout the year, including summer’s Prime Day event in July and efforts toward making the company’s fulfillment network as cost-effective as possible. Furthermore, while Amazon and other retailers may not be able to stave off the effects of tariffs, Jassy contended that the regionalized fulfillment centers helped lower delivery costs for consumers, indicating that increasing the number of nearby fulfillment centers could likewise have an ameliorating effect.
