TLDR:
- President Trump raised tariffs on Chinese imports to 125%, up from 104%
- Chinese sellers on Amazon plan to raise prices by up to 30% or exit US market
- China is home to about half of Amazon’s sellers, with 100,000 businesses in Shenzhen alone
- Amazon shares dropped around 2% in pre-market trading
- Chinese e-commerce association calls tariffs an “unprecedented blow” to sellers
Amazon shares fell today as Chinese sellers on the platform threatened to raise prices or abandon the US market entirely in response to President Trump’s latest tariff hikes.
The move comes after Trump increased tariffs on Chinese imports to 125% from the previous 104% level, escalating tensions between the world’s two largest economies.
Chinese companies selling on Amazon must now decide whether to absorb these costs, pass them on to consumers, or shift their focus to other markets.
Chinese Sellers Face Tough Choices
Wang Xin, head of the Shenzhen Cross-Border E-Commerce Association, told Reuters that the tariff increase wasn’t just a tax issue.
“The entire cost structure gets entirely overwhelmed,” Wang explained. “It’ll be very hard for anyone to survive in the US market.”
The association represents more than 3,000 Amazon sellers who are already experiencing customs delays and higher logistics costs.
Some sellers have already raised prices by up to 30% in the US market. Others are reducing inventory levels and cutting back on Amazon advertising fees.
Dave Fong, who sells products ranging from schoolbags to Bluetooth speakers, has already increased his prices and plans to reduce his Amazon advertising spend.
“For us and anyone else, you can’t rely on the US market, that’s quite clear,” Fong said. “We have to reduce investment, and put more resources into regions like Europe, Canada, Mexico and the rest of the world.”
Impact on Amazon’s Business
The tariff hikes could significantly impact Amazon’s business model and revenue stream.
China is home to approximately half of Amazon’s sellers globally. The southern city of Shenzhen alone hosts over 100,000 Amazon businesses generating annual revenues of $35.3 billion.
These Chinese sellers form a vital part of Amazon’s marketplace ecosystem. Their potential exodus threatens to disrupt product availability and pricing on the platform.
Amazon shares dropped around 2% in pre-market trading as investors processed the potential impact of the tariff increases on the company’s marketplace model.
Long-term Consequences
Brian Miller, who has been selling on Amazon from Shenzhen for seven years, says he no longer sees a reason to develop new products in the current environment.
Miller explains that building blocks for children that currently sell for $20 on Amazon cost his company $3 to produce. With the new tariffs, production costs would jump to $7.
To maintain his margins, Miller would need to raise prices by at least 20%. For higher-cost toys, price increases might reach 50%.
“I don’t see a scenario, if things don’t change, that serving the US from China is viable anymore,” Miller stated. “Manufacturing that serves the US will have to be transferred to other countries like Vietnam, or Mexico.”
Cross-border e-commerce has become a major economic driver. According to China’s State Council, imports and exports involving cross-border e-commerce were worth $358 billion last year.
China also hosts the manufacturing bases of other major e-commerce platforms like Shein and Temu, which could face similar challenges under the new tariff structure.
The US consumption market remains unmatched globally, severely limiting alternatives for Chinese exporters. This constraint raises the risk of intensifying price wars among Chinese sellers in other markets, potentially squeezing their profitability further.
Wang warns that the tariffs might lead to rapid unemployment increases in China, particularly affecting small enterprises and manufacturers who rely heavily on US sales.
On TipRanks, Amazon stock (AMZN) currently has a Strong Buy consensus based on 46 Buy ratings and just 1 Hold rating. The consensus price target stands at $263.81, suggesting a potential 38.05% upside from current levels.
