Trump tariffs mean higher prices, big losses for Amazon sellers

President Donald Trump’s aggressive tariff policy on April 2 didn’t just cause mayhem in the stock market. It sent Amazon sellers into a panic.

Many sellers on Amazon count on China for manufacturing and assembly due to lower costs and established infrastructure – up to 70% of goods on Amazon come from China, according to Wedbush Securities. With nearly all imports from China being taxed a staggering 145% under the latest tariffs, Amazon sellers are having to decide whether to raise prices or absorb the vastly increased cost of importing their goods.

Amazon CEO Andy Jassy on Thursday told CNBC that its vast network of third-party sellers will likely “pass the cost on” to consumers. He added that Amazon has done some “strategic forward inventory buys” and looked to renegotiate terms on some purchase orders to keep prices low.

Although Trump temporarily lowered tariffs on most countries to 10% on Wednesday, he doubled down on the huge tariffs on goods from China. Before the pause, average tariff rates under Trump were at the highest level since the Great Depression. The “reciprocal tariffs” were far steeper in regions like Southeast Asia. Tariffs also hit U.S. allies at unusual rates, including 20% on the European Union and previously announced 25% tariffs on Mexico and Canada.

Josianne Boisvert of Canadian-based Portable Winch Co. said she “was in a state of shock” when the tariffs were announced. For 20 years, the company has driven its products an hour to the U.S. border for duty-free shipping to American customers. 

“We are questioning ourselves if we just move our focus to Europe,” Boisvert said.

CNBC talked to several Amazon sellers to find out how the new tariffs are having an impact on their decisions about prices and where to manufacture.

In a small warehouse in San Rafael, California, Dusty Kenney showed CNBC hundreds of boxes filled with her PrimaStella brand baby spoons, bento boxes and other kids products. Most of them arrived by sea from China before tariffs went into effect. Paying the added tariffs could put her out of business if they continue, she said.

“I will hold my prices for as long as I can and just absorb those tariffs because I’m already competing against those Chinese sellers that are undercutting me,” Kenney said. Although tariffs will also impact her Chinese-based competitors, the cost of doing business in the U.S. is far higher than in China.

“The administration would like people to think that this is a China problem, and that this is only hurting Chinese-based businesses and helping U.S.-based businesses. But I am a U.S.-based business, let’s be clear,” Kenney said. “Everything’s warehoused here, designed here, photographed here. All the income that comes from that stays here.” 

Several sellers said they are considering raising prices if Trump’s tariffs stick around.

The vast majority of products on Amazon are sold by third-parties, but tariffs will also impact the company’s first-party brands.

That includes Amazon Basics-branded batteries, which compete against the likes of Duracell and Energizer by retailing at lower prices, said Jason Goldberg of the Publicis Groupe. 

If Amazon has to raise the price of its own batteries, he said, “consumers are likely to have a preference for that well-known, familiar brand.” 

The Seattle-based tech company is likely to wait at least six months before passing the tariff costs on to consumers, said Dan Ives of Wedbush Securities. 

“The last thing they want to do is right away just pass it to the consumer, because you don’t know how transitory this is,” said Ives, adding that Amazon likely got “well ahead of this” by diversifying its supply chain outside of China.

That’s a strategy many Amazon sellers are also trying.

Amazon did not immediately respond to a request for comment.

Some categories, like toys, have a long history of being manufactured in China and have thus far been exempt from tariffs. Jay Foreman started his career at a toy factory in Brooklyn, New York, about 40 years ago. 

Manufacturing migrated to China more than 30 years ago because of, “not only a tremendous workforce, but they’ve invested in the infrastructure to create a toy manufacturing supply chain,” said Foreman, CEO of Basic Fun, which makes popular toys like Tonka Trucks, Care Bears, Lincoln Logs, Tinker Toys, and Lite-Brite.

“Whether you’re making a Tonka Truck in China or an Apple iPhone, they figured it out. They’re making quality product there and it’s tough to replicate elsewhere,” Foreman said.

A lot of toy manufacturing moved to Vietnam, Mexico and India in the last five years because of China tariffs during Trump’s first term, Foreman said. But many of the toy factories there are also owned by Chinese companies, he said. 

“So you’re sort of not escaping doing business with the Chinese,” Foreman said. 

Other product categories, like teas, can’t easily be grown in the U.S. because of the climate.

“You need high humidity. Usually you need to be at a very high altitude. And those things only come together in certain parts of the world, ” said James Fayal, who runs high-energy tea brand Zest. With its green tea grown in coastal China and black tea in India, Fayal said he’ll have to pass the cost on to consumers because he doesn’t have a U.S. option.

For the brands that do manufacture in the U.S., the tariffs are creating a competitive advantage, those companies said. 

“Put our products side by side to a competitor’s that is getting it overseas and it’s a night and day difference,” said Dayne Rusch of Vyper Industrial. 

Vyper’s American-made stools and other shop equipment range in price from $350 to $650 while foreign-made alternatives can sell for less than $40, Rusch said.

At the National Hardware Show in March, Rusch said he was approached by many vendors asking if Vyper would consider manufacturing their products.

“There’s a huge opportunity for OEM manufacturers to start taking on more work from these people that were purchasing overseas and start making it here in the United States,” Rusch said.

The other sells that spoke to CNBC said it’s not financially feasible to relocate manufacturing to the U.S., even though it would allow them to avoid tariffs. 

Some, like William Su, are moving manufacturing completely out of China, but staying overseas. Su set up a factory for his Teamson brand in Vietnam in reaction to China tariffs during Trump’s first term. He’s now in talks to manufacture in India. Trump hit both countries with significant tariffs last week, although they’re temporarily on hold.

Surrounded by her colorful baby products in California, Kenney told CNBC she considered opening her own manufacturing site. 

“But that’s way over my head and out of my budget,” she said. “I would love to be able to manufacture in the U.S., but the truth is that the infrastructure is not there.”

With fewer factories in the U.S. than in China, Kenney said the cost to make her products domestically would be double or triple what she pays now.

“The people in China are hungry for the work,” she said. “They’ll get back to you right away. They make sure you get your shipments right away. They’re on it.”

There is one tariff announcement Trump made that’s a boon for U.S-based sellers like Kenney: closing the loophole known as “de minimis.” 

This exemption allowed orders under $800 to avoid paying duties and taxes, and it’s what made absurdly low prices possible on direct-from-China sites like Temu, Alibaba and Shein. U.S. Customs and Border Protection said it processed more than 1.3 billion de minimis shipments in 2024, up from over 1 billion shipments in 2023.

Chinese sellers send small orders directly to U.S. customers to keep shipments under the $800 limit. U.S. sellers like Kenney don’t often qualify for de minimis because they ship in large quantities by the pallet, bringing products to their warehouses for quality checks instead of shipping straight to customers from Chinese factories.

Kenney used to sell her most popular product, a set of six silicone baby spoons, for $9.99 on Amazon. She’s reduced the price to $7.99 to compete with knockoffs that sell for as low as $3 on Temu.

“I’ve even had them rip off all of my photos and content that I’ve created and use it to sell their knockoff products,” Kenney said.

Trump briefly put de minimis on hold in February. Days later, he temporarily reinstated the loophole because huge numbers of Chinese packages started piling up at U.S. post offices and customs offices ill-equipped to collect duties at such a fast pace. 

The president on April 2 again announced that he was ending de minimis, effective May 2. 

The White House said “adequate systems” are now in place to collect tariffs. It added that the loophole is being closed to target “deceptive” Chinese-based shippers who “hide illicit substances, including synthetic opioids, in low-value packages to exploit the de minimis exemption.”

Foreman of Basic Fun said his Tonka Truck goes through many layers of inspection before landing on Amazon. 

“Anything that comes in on de minimis is not going through that safety scrutiny at all,” Foreman said. “Small packets that might have included a dress or some kind of tchotchke might have been stuffed with illegal drugs or things like that, might be counterfeit, might be bootlegs or knockoffs.”

Some Amazon sellers were benefiting from de minimis, particularly on its separate direct-from-China site Amazon Haul, which launched in November to compete with Temu. But killing de minimis will be a net positive for Amazon because it will hurt competitors like Temu, said Ives at Wedbush Securities. 

De minimis is a “loophole that’s been tugging at Amazon really for the last 18 months,” Ives said. 

What remains to be seen is how Trump’s tariffs will shift in coming weeks and what tariffs other countries will impose on U.S. goods. Those pose a risk for Amazon and its U.S. merchants that sell to foreign customers.

“It just has a cascading impact across the entire economy,” Goldberg of Publicis Groupe said. “Uncertainty is really bad for business, regardless of who wins or loses on any specific tariff.”