Amazon is facing an unprecedented balancing act – trying to compete with Chinese marketplaces on price while simultaneously keeping its marketplace an attractive place to do business for its U.S. suppliers. Now, Donald Trump’s proposed tariffs of up to 60% on Chinese imports threaten to make this juggling act impossible.
The retail giant’s recent moves reflect this tension. Earlier this month, Amazon launched “Haul,” a new shopping experience targeting price-conscious consumers with items under $20. This direct response to competitors like Temu came alongside an unusual decision to freeze seller fees for 2025.
“Amazon is trying to woo sellers and consumers at the same time which is not how Amazon’s flywheel has traditionally operated,” notes Josh Clarkson, a digital commerce consultant. “This is unlikely to work and I anticipate within 12 months one of the above will no longer be as it is today.”
Amazon’s Structural Challenge
At the heart of Amazon’s dilemma lies a regulatory framework that could amplify, rather than reduce, Chinese platforms’ advantages. The $800 de minimis rule allows direct-to-consumer platforms like Temu to potentially avoid tariffs on individual shipments, while traditional retailers and sellers importing in bulk would face the full impact.
“Many small-time sellers, particularly from China, may find ways to evade the tariffs, like their current practices,” explains Judah Bergman, founder and president of Jool Baby. Such tactics can include breaking larger shipments into smaller ones under $800, misclassifying products, or routing shipments through different countries. “The larger the tariff, the larger the reward for unethical players.”
While recent Biden administration changes and bipartisan legislation aim to restrict de minimis benefits, the timeline and impact remain uncertain. This regulatory flux adds another layer of complexity to Amazon’s strategic decisions.
Tariffs Will Impact Amazon Sellers And Vendors Differently
The proposed tariffs would impact Amazon’s sellers and vendors differently, creating additional strategic challenges for the platform. As Armin Alispahic, retail operations team leader at Acadia explains, third-party sellers have theoretical pricing flexibility but face practical constraints: they may find their offers losing the Buy Box if prices exceed Amazon’s expectations, particularly if cheaper options exist on other platforms.
For first-party vendors, the timing is particularly complex. Annual Vendor Negotiations (AVNs) are just beginning with U.S. suppliers, but as Martin Heubel, a consultant to Amazon vendors, explains, “I don’t know of any supplier that is currently planning to implement any cost increases due to the looming threat of tariffs – there’s simply too much uncertainty around them.”
This uncertainty creates a strategic puzzle for vendors. While they can technically notify Amazon about wholesale price increases at any time, Amazon’s response often makes this challenging. “Amazon is typically the one retailer they have the most difficulty getting their cost price increases accepted and implemented with,” Heubel notes. “That’s because Amazon is a self-proclaimed price follower and holds usually less inventory of a brand than a Walmart or Target.”
This inventory strategy creates a unique disadvantage for vendors. As Heubel explains, “Amazon is the first affected by a price increase because they don’t hold a lot of stock and will see the increase as the last retailer reflected in the market segment.” Other retailers, holding more inventory, can delay price increases until they exhaust stock purchased at lower prices.
Amazon Sellers Are Already Stockpiling
Some sellers are already reacting to the tariff threat. The Wall Street Journal reported this week that businesses are rushing to stockpile inventory before any new tariffs take effect. One seller ordered a year’s worth of inventory – about $50,000 in goods – immediately after the election.
However, industry leaders warn against panic buying. “I’m skeptical that tariffs will be implemented on day one,” says Jool Baby’s Bergman. “Carrying excess inventory comes with its own costs – interest rates, storage fees, and various other carrying costs. At some point, it becomes cheaper to pay the tariffs than to hold excessive inventory.”
Winners And Losers
The disruption could create unexpected winners. “We’re probably less reliant on sourcing from China than many other businesses because we manufacture in the U.S., so we’re probably at a relative advantage,” explains Jamie Roller, Director of Marketplaces at personal care brand Dr Squatch. “We’ll be able to double down on the Amazon channel without the concern about increasing FBA costs and perhaps with higher ad investment relative to peers who are more reliant on Chinese sourcing.”
Meanwhile, major retailers are already warning about price impacts. Walmart’s CFO John David Rainey recently told CNBC that the retailer could raise prices on some items if the tariffs take effect. While about two-thirds of Walmart’s products are made, grown or assembled in the U.S., the impact on Chinese imports could still be significant.
Amazon Will Face Strategic Implications
Amazon faces difficult choices ahead. Its Haul store strategy depends on maintaining competitive prices against Chinese marketplaces. However, protecting seller profitability – especially for legitimate U.S.-based businesses – may require accepting higher prices or reduced selection.
The fee freeze, while helpful, may prove insufficient against 60% tariffs. As Clarkson suggests, Amazon may need to either shift Haul’s sourcing to a U.S. base or restructure its fee model to attract Temu sellers – effectively choosing between competing priorities.
“We will have to wait and see whether the implementation of Trump’s tariffs has any chance of being implemented to this extent, or whether much of it was just part of the election campaign rhetoric,” says Heubel. “I personally believe that there will be some form of tariffs, but not to the extent of a 20-30% levy, as the U.S. will probably want to avoid counter-tariffs from its trading partners.”
The outcome could fundamentally reshape Amazon’s marketplace model. The company’s traditional strength has been offering everything to everyone. But in a high-tariff environment, maintaining both ultra-low prices and a healthy U.S. seller base may prove impossible.
It’s too early to say which strategy Amazon will choose. But as Trump’s potential return to office approaches, the pressure to choose a direction will likely intensify. The everything store may soon discover that in today’s complex trade environment, you can’t be everything to everyone.
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