Amazon’s Dilemma: Trump’s Tariffs and U.S. Sellers

Amazon is facing an unprecedented challenge as it tries to navigate the delicate balance of competing with Chinese marketplaces on price while maintaining an attractive platform for U.S. sellers. The proposed tariffs, which could reach as high as 60% on Chinese imports, add a layer of complexity to this already difficult task, potentially forcing Amazon into a tough decision between offering low prices or protecting its U.S.-based suppliers.

The retail giant’s recent actions illustrate the tension at play. Earlier this month, Amazon introduced “Haul,” a new shopping experience aimed at price-conscious consumers looking for products under $20. This move is a direct response to the growing competition from platforms like Temu, which offer similar low-cost products. In an unusual decision, Amazon also froze seller fees for 2025, signaling an attempt to retain sellers despite the changing market conditions. According to Josh Clarkson, a digital commerce consultant, Amazon’s dual focus on attracting both consumers and sellers is a departure from its usual strategy. Clarkson suggests that this approach may not succeed, predicting that within a year, Amazon will likely have to choose between its priorities.

The regulatory landscape further complicates Amazon’s position. A key issue is the $800 de minimis rule, which allows direct-to-consumer platforms like Temu to avoid tariffs on individual shipments valued under $800. This regulatory advantage is not available to traditional retailers, including Amazon, which faces full tariffs on bulk shipments. Judah Bergman, founder of Jool Baby, explains that some smaller Chinese sellers may continue to evade tariffs by splitting larger shipments into smaller ones or misclassifying products. Such tactics could increase as tariffs rise, with the potential for larger rewards for those willing to break the rules. While recent changes under the Biden administration and bipartisan efforts seek to reduce these de minimis benefits, the timeline and real impact remain unclear, adding uncertainty to Amazon’s decision-making process.

The proposed tariffs would have distinct implications for Amazon’s sellers and vendors, complicating the platform’s strategic choices. Armin Alispahic, retail operations team leader at Acadia, highlights the pricing flexibility of third-party sellers. However, these sellers face significant constraints, as they may lose the coveted Buy Box if their prices rise above Amazon’s expectations, particularly if cheaper alternatives exist elsewhere. First-party vendors, who supply products directly to Amazon, face their own set of challenges. As Martin Heubel, a consultant to Amazon vendors, points out, there is currently no indication that suppliers are preparing to raise their prices due to the looming tariffs. This is largely because the uncertainty surrounding the tariffs makes it difficult for suppliers to plan.

This uncertainty also creates a unique disadvantage for Amazon’s first-party vendors. Amazon’s inventory strategy — maintaining relatively low stock levels — means that price increases affect Amazon immediately. Other retailers, who typically hold more inventory, can delay price hikes until they have exhausted their older stock purchased at lower prices. For Amazon, this results in the company being the first to feel the effects of higher costs, complicating negotiations with suppliers.

To mitigate the potential impact of the tariffs, some Amazon sellers are already stockpiling inventory. According to a report by The Wall Street Journal, some sellers have ordered a year’s worth of inventory in anticipation of rising costs. However, industry experts caution against this approach. Bergman of Jool Baby warns that carrying excess inventory can lead to significant costs, including interest rates and storage fees. In some cases, it might be cheaper for sellers to pay the tariffs than to hold large quantities of inventory.

Despite these challenges, the tariff situation could create unexpected winners. For example, Jamie Roller, Director of Marketplaces at personal care brand Dr. Squatch, notes that his company is less reliant on Chinese sourcing, which could place it at a relative advantage compared to competitors who depend heavily on imports from China. Roller believes his company can focus more on its Amazon channel without worrying about rising fulfillment costs, potentially outpacing competitors who face higher ad spending and shipping fees.

Meanwhile, other major retailers are already warning about the potential impact on prices. Walmart’s CFO, John David Rainey, has stated that the company could raise prices on some products if the tariffs are implemented. While a significant portion of Walmart’s products are sourced from the U.S., the retailer could still be affected by the increased costs of Chinese imports.

For Amazon, the stakes are high. Its Haul store strategy depends on offering competitive prices, particularly against Chinese marketplaces. However, maintaining this price competitiveness while ensuring profitability for U.S. sellers may force Amazon to make difficult choices. One potential solution could be to shift Haul’s sourcing to U.S.-based suppliers to avoid the impact of Chinese tariffs, though this may alienate some sellers. Alternatively, Amazon could restructure its fee model to appeal to Chinese sellers like those on Temu, but this could compromise the platform’s focus on U.S.-based vendors.

The ultimate outcome of this situation remains uncertain. As Heubel notes, there is still some doubt as to whether Trump’s proposed tariffs will be implemented to the extent that has been suggested. While some form of tariffs seems likely, it is unclear whether they will be as severe as the 60% levies discussed during the election campaign. What is clear is that the tariff situation could fundamentally alter Amazon’s marketplace model. The company’s traditional strength has been offering a wide variety of products at competitive prices, but in a high-tariff environment, it may become increasingly difficult to balance the needs of both low-cost consumers and U.S.-based sellers.

As the political landscape evolves, the pressure on Amazon to make strategic decisions will intensify. The retail giant may soon face the reality that, in today’s complex trade environment, it may no longer be able to be everything to everyone.