Importance Score: 72 / 100 🔴
New tariffs implemented by former President Donald Trump on April 2 triggered significant volatility in financial markets and sparked concern among Amazon marketplace vendors. These e-commerce businesses, many of whom rely on cost-effective manufacturing and established supply chains in China, are now grappling with the potential impact of these trade measures.
Impact on Amazon Sellers
A substantial portion of Amazon’s third-party sellers depend on Chinese manufacturing and assembly due to lower production expenses and robust infrastructure. Industry analysts estimate that up to 70% of goods sold on Amazon originate from China. With the newly imposed tariffs potentially increasing taxes on imports from China by a significant margin, these sellers face difficult choices: either increase prices for consumers or absorb the considerably higher costs of importing their merchandise.
Amazon CEO Andy Jassy acknowledged in a recent interview that third-party sellers will likely transfer these increased expenses to consumers. He noted that Amazon has proactively taken steps to mitigate price increases through strategic inventory purchasing and renegotiating purchase order terms.
While tariffs on most countries were temporarily reduced to 10%, the levies on Chinese goods remain substantial. Prior to this adjustment, average tariff rates under the Trump administration had reached levels not seen since the Great Depression. These “reciprocal tariffs” were particularly elevated in regions such as Southeast Asia and also impacted U.S. allies, with rates of 20% on the European Union and previously announced tariffs of 25% on goods from Mexico and Canada.
Josianne Boisvert of Portable Winch Co., a Canadian business, expressed her dismay at the tariff announcements. For two decades, her company has transported products to the U.S. border for duty-free shipment to American customers.
vCard.red is a free platform for creating a mobile-friendly digital business cards. You can easily create a vCard and generate a QR code for it, allowing others to scan and save your contact details instantly.
The platform allows you to display contact information, social media links, services, and products all in one shareable link. Optional features include appointment scheduling, WhatsApp-based storefronts, media galleries, and custom design options.
“We are considering shifting our focus to the European market,” Boisvert stated, highlighting the potential shift in trade priorities for businesses.
CNBC interviewed several Amazon sellers to understand how the new tariffs are influencing their pricing strategies and manufacturing location decisions.
Retail Price Increases Loom
Dusty Kenney, owner of PrimaStella, showcased her inventory of baby spoons, bento boxes, and other children’s products in her California warehouse. The majority of her stock arrived from China before the tariffs took effect. She indicated that sustaining these added tariffs could jeopardize her business if they persist.
“I intend to maintain my current prices as long as possible and absorb the tariff costs, given that I am already competing with Chinese sellers who are undercutting my prices,” Kenney explained. While tariffs will also affect her Chinese competitors, operational costs in the U.S. significantly exceed those in China.
Kenney emphasized, “The administration suggests this is solely a China problem that aids U.S. businesses at the expense of Chinese businesses. However, I am a U.S.-based enterprise. My warehousing, design, and photography operations are all located here, and all revenue generated remains within the U.S.”
Numerous sellers are contemplating price increases if the tariffs become long-term policy.
Although third-party sales dominate Amazon, the tariffs will also affect Amazon’s own private-label brands.
Jason Goldberg of Publicis Groupe pointed out that Amazon Basics batteries, which compete with brands like Duracell and Energizer by offering lower prices, will also be impacted.
According to Dan Ives of Wedbush Securities, if Amazon increases prices on its own batteries, consumers may favor established, name-brand alternatives.
Ives suggests that the Seattle-based technology giant is likely to delay passing tariff costs onto consumers for approximately six months, citing the uncertainty of the tariff situation’s duration. He added that Amazon likely prepared for this scenario by diversifying its supply chain beyond China.
Many Amazon sellers are similarly exploring supply chain diversification.
Amazon has not yet issued a public statement on the matter.
Potential for U.S. Manufacturing Revival?
Certain product categories, such as toys, have a long history of Chinese manufacturing and were initially exempt from tariffs. Jay Foreman, CEO of Basic Fun, a toy manufacturer of brands like Tonka Trucks and Care Bears, began his career in a Brooklyn toy factory around 40 years ago.
Foreman explained that manufacturing shifted to China over 30 years ago due to a large workforce and significant investment in infrastructure to create a toy manufacturing supply chain.
“Whether it’s a Tonka Truck or an Apple iPhone, China has mastered quality product manufacturing, making it difficult to replicate elsewhere,” Foreman noted.
He mentioned that some toy manufacturing moved to Vietnam, Mexico, and India during Trump’s first term due to earlier China tariffs. However, many factories in these locations are also Chinese-owned.
“So, in many ways, you are still conducting business with Chinese entities,” Foreman stated.
Other product categories, such as teas, are geographically limited in terms of cultivation. James Fayal, founder of Zest Tea, explained that ideal tea-growing conditions require high humidity and high altitudes, conditions only found in specific global regions. With green tea sourced from coastal China and black tea from India, Fayal anticipates passing increased costs to consumers, lacking a U.S.-based sourcing option.
Conversely, companies manufacturing in the U.S. see the tariffs as a competitive advantage.
Dayne Rusch of Vyper Industrial stated, “Comparing our U.S.-made products to overseas competitors reveals a significant difference in quality.”
Vyper’s American-made stools and shop equipment retail between $350 and $650, while foreign-made alternatives can cost under $40, according to Rusch.
At the National Hardware Show in March, Rusch reported receiving inquiries from numerous vendors about Vyper manufacturing their products.
Rusch believes, “There’s a significant opportunity for U.S. OEM manufacturers to take on work from companies previously sourcing overseas and begin domestic production.”
However, other sellers interviewed by CNBC indicated that relocating manufacturing to the U.S. is not financially viable, even to avoid tariffs.
Some businesses, like William Su of Teamson brand, are moving manufacturing out of China entirely but remaining overseas. Su established a factory in Vietnam in response to previous China tariffs and is now exploring manufacturing in India. Both Vietnam and India have recently been subjected to tariff measures, albeit temporarily suspended.
Kenney, surrounded by her baby products, mentioned considering establishing her own U.S. manufacturing facility.
“But it’s beyond my current capabilities and budget,” she admitted. “While U.S. manufacturing is appealing, the necessary infrastructure is lacking.”
Kenney noted that with fewer U.S. factories compared to China, domestic production costs would be double or triple her current expenses.
“Chinese workers are eager for work,” she said. “They are responsive, ensure timely shipments, and are very efficient.”
De Minimis Threshold Under Scrutiny
One tariff-related announcement from the Trump administration offers potential benefits to U.S.-based sellers like Kenney: the reassessment of the “de minimis” exemption.
This exemption, allowing orders under $800 to bypass duties and taxes, has facilitated exceptionally low prices on direct-from-China platforms like Temu, Alibaba, and Shein. U.S. Customs and Border Protection data reveals over 1.3 billion de minimis shipments processed in 2024, up from over 1 billion in 2023.
Chinese sellers utilize this exemption by shipping small orders directly to U.S. consumers, keeping shipments below the $800 threshold. U.S. sellers like Kenney generally do not qualify for de minimis due to bulk shipments to warehouses for quality control before distribution to consumers.
Kenney previously sold her popular six-pack of silicone baby spoons for $9.99 on Amazon but lowered the price to $7.99 to compete with knockoffs sold for as low as $3 on Temu.
“They have even stolen my product photos and content to market their counterfeit products,” Kenney stated.
The Trump administration briefly suspended the de minimis rule in February but temporarily reinstated it days later due to logistical challenges with processing and collecting duties on a massive influx of Chinese packages.
However, on April 2, the administration again announced the termination of de minimis, set to take effect on May 2.
The White House indicated that “adequate systems” are now in place for tariff collection, citing the closure of the loophole as a measure against “deceptive” Chinese shippers using de minimis to conceal illicit substances, including synthetic opioids, within low-value packages.
Foreman of Basic Fun emphasized the rigorous inspection processes for his Tonka Trucks before reaching Amazon, contrasting this with de minimis shipments.
“De minimis shipments bypass this safety scrutiny entirely,” Foreman explained. “Small packets, potentially containing apparel or trinkets, could be used to smuggle illegal drugs, counterfeit goods, or knockoffs.”
While some Amazon sellers, particularly those on Amazon Haul (a direct-from-China site launched in November to rival Temu), benefited from de minimis, Wedbush Securities’ Ives believes eliminating de minimis will ultimately benefit Amazon by disadvantaging competitors like Temu.
Ives describes de minimis as a “loophole that has been a concern for Amazon for the past year and a half.”
The future impact of Trump’s tariffs and potential retaliatory tariffs from other nations on U.S. goods remains uncertain. These factors pose risks for Amazon and U.S. merchants selling internationally.
Goldberg of Publicis Groupe concluded, “This creates a ripple effect throughout the entire economy. Uncertainty is detrimental to business, regardless of who benefits or suffers from specific tariffs.”