Amazon makes urgent move to avoid US-China trade war impact

Amazon (AMZN) is making swift moves to combat a growing threat to sales.

Since taking office in January, President Donald Trump has doubled down on his plan to boost manufacturing in the U.S. and free the nation from its reliance on imported goods by enforcing tariffs on multiple countries.

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​​Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers through price hikes.

Related: Amazon changes a cheap service amid growing threat

On April 2, President Trump announced a 10% “baseline” tariff on all countries importing goods to the U.S., with roughly 60 countries seeing higher tariff rates. 

However, on April 9, he switched gears and enforced a 90-day pause on reciprocal tariffs on all countries (except China), dropping them to a universal rate of 10%. He also raised tariffs on China to a jaw-dropping 145%.

Shortly after these announcements, Amazon reportedly began canceling orders for products made in China and other Asian countries, which frustrated vendors.

Amazon takes unexpected action

However, a recent report from Business Insider revealed that Amazon is now actively working with some of its vendors to prevent losing their business, an outcome that would reduce product availability for customers.

In an internal document, Amazon stated that it will pay higher prices to its vendors for their products on a “case-by-case basis” to “share the tariff impact.” This would help vendors offset the higher costs they may face to source their products from countries that are impacted by tariffs.

This offer isn’t available to all vendors, however. In most cases, it is offered to vendors who agree to guaranteed profit margins. This means if a vendor’s products don’t reach a fixed profit margin, they must pay Amazon extra.

Related: Amazon makes harsh move amid major customer concern

This is risky, because Amazon can sell a vendor’s products at a discounted price, which would then make the vendor responsible for covering the lost profits.

More than 60% of Amazon’s sales come from third-party sellers. Amazon paying more to its vendors to help soften the blow of tariffs means that Amazon shoppers will likely encounter higher prices for products.

Amazon CEO recently sent a stern warning to shoppers

The move from Amazon comes after Amazon CEO Andy Jassy said in a recent interview with CNBC that the company’s top priority is keeping prices low for customers.

“Whenever you have any threat of any kind of discontinuity, as a team, you have to think about what are the things you can do to help customers,” said Jassy. “So we’re doing everything we can to try and keep prices the way they’ve been for customers – as low as possible. We’ve done some strategic forward inventory buys to get as many items as makes sense for customers at lower prices.”

More Tariffs:

• Mark Cuban sounds alarm on how consumers should handle tariffs
• Target makes controversial move to dodge high tariff costs
• Walmart doubles down on harsh tactic to shrink threat of tariffs

However, Jassy warned that third-party sellers on Amazon may pass the extra costs that tariffs may bring onto customers.

“I’m guessing that sellers will pass that cost on; I think they’ll try, and I understand why,” said Jassy. “I mean, depending on which country you’re in, you don’t have 50% extra margin that you can play with. So I think they’ll try and pass the cost on.”

Trump’s tariffs are already making some consumers anxious about potential price increases, which is prompting them to consider cutting back on their spending.

According to a recent survey from market research company Numerator, 83% of Americans said that they are adjusting their shopping habits to prepare for the higher prices Trump’s tariffs could bring. Some of these changes include searching for sales and coupons, delaying purchases, and buying less imported goods.

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