Trump's Tariffs Are Already Causing Price Spikes on Amazon

Well, that didn't take long. Just a few weeks after President Donald Trump announced his aggressive tariffs, some China-based sellers on Amazon (AMZN -1.54%) have started increasing their prices -- sometimes significantly. While Trump said recently he's in talks with China to work out trade deals, the U.S.-imposed tariffs of 145% began earlier this month. Here's how they're impacting Amazon and why it's a problem for the e-commerce giant. E-commerce sales could take a hit It's an understatement to say that the 145% tariff on Chinese imports is bad news for Amazon. An estimated 60% of the products sold on its e-commerce platform are imported from countries across the globe, and Morningstar estimates that one-third of those imports come from China. Image source: Amazon. SmartScout data shows that of the sellers increasing prices on Amazon over the past few weeks, one-quarter of them are based in China. Moreover, prices have increased by a whopping 29% on average from these sellers. Higher prices will likely cause some consumers to pull back on their spending and some recent data shows that American buyers are already getting skittish. Consider this latest data: A University of Michigan survey found that consumer sentiment is at its lowest in 32 months. Yale's Budget Lab research shows that tariffs could cost consumers $3,800 annually. A separate survey found that 45% of Americans plan to spend less on non-necessities and 33% intend to spend less on necessities over the next year. The point is that tariffs are already causing prices to rise for some products on Amazon, which could impact e-commerce sales, and the higher prices are colliding with belt-tightening by consumers. That's a recipe for Amazon's falling e-commerce sales. Advertising isn't immune either Another concern for Amazon is that during economic downturns, advertising sales usually slow down. For example, ad spending fell 7.5% across the industry because of the COVID-19 pandemic. Amazon's ad sales rose 20% in 2024 to $56.2 billion and now account for nearly 9% of its total sales. While there's no data yet on Amazon's ad sales slowing, it's worth noting that an estimated $8 billion of the company's advertising revenue came from China-based sellers last year. With those sellers feeling the pinch from tariffs, they may be less inclined to spend money on ads. And if U.S. consumers start spending less on Amazon's platform as they pinch pennies, there will be far less incentive to buy ads. One thing Amazon has going for it Despite these uncertain circumstances for Amazon, current investors may not want to panic just yet. The Trump administration appears open to trying to ratchet down the trade war with China, with President Trump saying recently that the tariff rates are high and need to come down. What's more, Amazon makes the majority of its profit from Amazon Web Services (AWS), its cloud computing business. AWS accounted for 58% of the company's operating income in 2024, and its sales increased by 19%. AWS also holds a majority of the cloud computing market with 30%, compared to 21% for Microsoft. Since AWS is a cloud service, it's unlikely to be impacted by tariffs. And as artificial intelligence (AI) cloud services grow in the coming years, Amazon is tapping into a growing AI cloud market that will be worth an estimated $2 trillion by 2030. Still, investors should keep an eye on what's happening with China tariffs and any additional signs that consumers are pulling back on spending. There's a lot of uncertainty right now, and that means Amazon's stock could remain volatile for the foreseeable future.