Amazon CEO Andy Jassy believes that the company’s third-party sellers will likely pass on the increased costs resulting from President Trump’s tariffs to consumers, potentially affecting prices on Amazon’s platform.
Amazon’s third-party marketplace is vast, comprising millions of sellers, with approximately 60% of all products sold on Amazon’s website coming from these sellers. Many of these sellers are based in China or source their products from the region, making them directly impacted by the tariffs imposed by President Trump. In an interview with CNBC’s Andrew Ross Sorkin, Jassy explained that he understands why sellers might pass on the costs, stating, “I mean, depending on which country you’re in, you don’t have 50% extra margin that you can play with… I think they’ll try and pass the cost on.”
Following the announcement of Trump’s tariff plan, Amazon began canceling some direct import orders for products sourced from China. Consultants told CNBC that some vendors had products ready for pickup at shipping ports, only to receive notifications via Amazon’s internal system, Vendor Central, that their orders were canceled. This move was part of Amazon’s efforts to mitigate the immediate impact of the tariffs.
In anticipation of potential price hikes due to the tariffs, some consumers have started buying goods in advance. Jassy noted that Amazon has seen evidence of this behavior, but it’s too early to determine if it’s a widespread pattern. “People have not stopped buying and in certain categories, we do see people buying ahead, but it’s hard to know if it’s just an anomaly in the data because it’s just a few days, or how long it’s going to last,” he said.
President Trump had initially imposed a far-reaching tariff plan, which was later revised to a universal 10% rate for all trade partners except China. This development has significant implications for businesses, including Amazon’s third-party sellers and its cloud computing business, Amazon Web Services (AWS). AWS has been a major beneficiary of the surging demand for artificial intelligence and related infrastructure, such as data centers.
To address potential tariff-related challenges, Amazon has taken proactive measures. The company has made “strategic forward inventory buys” and renegotiated terms on some purchase orders to keep prices low. Additionally, AWS began diversifying its supply chain about five years ago, enabling it to source components from multiple markets rather than relying on a single country. Jassy emphasized that this diversification effort will help mitigate the impact of tariffs on AWS’s operations.
The tariffs could potentially increase infrastructure costs for companies building data centers to support the growing demand for AI technologies, an area where Amazon is heavily invested. The company has pledged to spend up to $100 billion this year on AI technologies. Despite the challenges posed by tariffs, Jassy affirmed Amazon’s commitment to continuing its buildout of new data centers, stating, “We’re going to keep building.”
