Apparatchik Trump Says 'No.. More Pain' Ahead of Amazon EarningsPresident Trump's new tariffs have had a significant negative impact on Amazon's stock performance, revenue, and earnings, primarily due to increased costs and supply chain disruptions.
Here below is a detailed analysis of these effects.
Impact on Amazon's Stock Performance
Amazon's stock has seen substantial declines following the announcement of Trump's tariff plan. The company's shares dropped nearly 7% within two days of the announcement and are down nearly 21% year-to-date. These tariffs have exacerbated existing challenges for Amazon, which was already struggling in early 2025 with a 13% decline in stock value during the first quarter. The broader market also suffered, with technology stocks experiencing sharp declines as investors reacted to fears of higher costs and inflation.
Revenue Challenges
Amazon's reliance on Chinese suppliers for merchandise has made it particularly vulnerable to the newly imposed tariffs. Over 50% of Amazon's top third-party sellers are based in China, and many of their products are subject to hefty import taxes, including a 34% tariff on Chinese goods. These tariffs increase landed costs for a significant portion of Amazon's inventory, forcing sellers to either absorb the additional expenses or pass them on to consumers through higher prices. This could lead to reduced consumer demand, as higher prices may deter shoppers from purchasing goods on Amazon's platform.
Additionally, the elimination of duty exemptions on minor imports—previously advantageous for discount platforms such as Temu and Shein—has disrupted Amazon's competitive pricing strategy. While this change may level the playing field among e-commerce platforms, it also raises operational costs for Amazon's marketplace vendors who had relied on these exemptions.
Earnings Pressure
The tariffs are projected to slash Amazon's annual operating profits by $5 billion to $10 billion due to increased merchandise costs. Goldman Sachs estimates that these costs could rise by 15% to 20%, further straining profitability. While Amazon has historically maintained lower prices compared to competitors, absorbing these increased expenses without raising prices significantly may be unsustainable in the long term.
Moreover, fears of inflation resurgence due to Trump's trade policies could further dampen consumer purchasing power. This would likely lead to lower sales volumes and additional pressure on profit margins across Amazon's retail operations.
Potential Mitigation Strategies
To counteract these challenges, Amazon may implement several measures:
Vendor Negotiations. The company could negotiate with suppliers to share the burden of increased input costs rather than bearing them entirely.
Price Adjustments. Selective price increases on certain products may help offset rising costs without alienating customers entirely.
Supply Chain Diversification. Shifting sourcing away from heavily tariffed regions like China or focusing more on domestic suppliers could reduce exposure to trade disruptions.
Focus on Services. Amazon’s cloud division, AWS, contributes significantly to its operating income (58% in Q4 2024) and remains largely unaffected by tariffs. Increased emphasis on AWS could help mitigate losses from retail operations.
Technical challenge
The main technical graph indicates on Bearish market in development, with nearly 30% potential to further decline, down to major 10-year average support.
Conclusion
Trump’s tariffs have created substantial headwinds for Amazon by driving up costs and disrupting its supply chain. These challenges have led to stock declines, reduced revenue potential, and significant earnings pressure. While Amazon is exploring mitigation strategies such as vendor negotiations and diversification, the long-term impact will depend on how effectively the company adapts its operations amidst ongoing trade tensions.
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Best 'Apparatchik' wishes,
PandorraResearch Team 😎
