Amazon CEO Warns of Chinese Product Price Increases Due to Tariffs
Amazon customers can expect to pay more for Chinese products as the tariffs war between China and the United States continues to escalate, according to Amazon CEO Andy Jassy.
To CNBC's "Squawk Box" co-host Andrew Ross Sorkin, in an interview on Thursday, Jassy signaled that third-party sellers that experience the tariff will likely charge additional costs to shoppers. He did acknowledge the economic reality that most of the sellers wouldn't be in a position with sufficient profit margins to take tariffs in their books, thus the price hike will effectively become inevitable.
Amazon's Response to Tariff Issues
Current reports say Amazon has withdrawn some orders of Chinese-produced products amid growing trade tensions. Jassy did not explicitly verify those reports, but he repeated the company is examining all avenues of options to insulate impacts.
Jassy explained that whenever there is a threat of supply chain disruptions, the team at Amazon must consider every available solution in order to serve their customers. He again maintained that the company is dedicated to maintaining prices at low levels amid the challenging circumstance.
The retail giant has taken a number of approaches to deal with the situation, such as making strategic ahead-of-time inventory buys to lock in products at discounted rates and renegotiating some deals to ensure competitive pricing.
Recent Developments in U.S.-China Tariffs
The comments trailed President Donald Trump on Wednesday announcing a 90-day hiatus from imposing double-digit tariffs on imports from a number of countries, reducing most tariffs to 10% for the interim. However, the White House afterwards explained that tariffs on Chinese imports have indeed been increased to 145%.
This uncertainty has already changed some of the consumer behaviors, with Jassy noting that in certain product categories, Amazon has noticed customers purchasing earlier than they normally do. But he cautioned that it is unknown whether this is a long-term trend or merely temporary changes in purchasing patterns.
Impact on Chinese Sellers
The tariff dynamic is posing some serious headaches for Chinese companies that sell through Amazon's marketplace. Wang Xin, the director at Shenzhen Cross-Border E-Commerce Association on behalf of over 3,000 Amazon sellers, told Reuters that Chinese companies are going to increase prices to U.S. customers due to tariffs.
Wang warned that aside from increased expenses, American consumers are to anticipate customs delays and increased logistics expenses. She said that the scenario poses existential threats to the majority of sellers because the entire cost model becomes unsustainable, and it is extremely difficult for Chinese sellers to remain afloat in the US market.
As the trade war rages on, Amazon goes on with its focus on reducing price increases, with Jassy again stating that the company remains committed to maintaining costs as minimal as possible for customers in the face of combative global trade conditions.