Chinese companies that sell to US customers on Amazon are reportedly preparing to raise prices or quit the US market because of tariffs imposed by President Trump. Amazon CEO Andy Jassy has meanwhile confirmed that he expects the cost of tariffs to be passed on to US buyers.
Reuters talked to several individual sellers and a Chinese trade association that represents over 3,000 Amazon sellers for an article published today. “It’ll be very hard for anyone to survive in the US market” because “the entire cost structure gets entirely overwhelmed” by the tariffs, Reuters was told by Wang Xin, who leads the Shenzhen Cross-Border E-Commerce Association. Xin also “not[ed] the tariffs could also lead to customs delays and higher logistics costs.”
Trump increased tariffs on China imports to 125 percent yesterday even as he announced a 90-day pause on tariff hikes affecting other countries. The total tariffs are 145 percent because the newly raised tariff “comes on top of a 20 percent fentanyl-related tariff that Trump previously imposed on China,” CNBC wrote today.
It’s no surprise that tariffs of this size would have a big impact on Chinese sellers, who have been courted by Amazon for years and are a source of cheap products for US buyers (though those products are often of poor quality).
Amazon declined to comment about the tariffs’ impact on Chinese sellers when contacted by Ars today. But Jassy told CNBC that he expects sellers to pass the cost of tariffs on to consumers.
“I’m guessing that sellers will pass that cost on… depending on which country you’re in, you don’t have 50 percent extra margin that you can play with so I think they’ll try and pass the cost on,” Jassy said.
Jassy said Amazon is “doing everything we can to try and keep prices the way they’ve been for customers, as low as possible.” Amazon has already “done some strategic forward inventory buys to get as many items as make sense for customers at lower prices,” and may renegotiate some deals, he said.
Seller: “You can’t rely on the US market”
Reuters spoke to five Chinese sellers, writing that “three said they would look to raise prices for their exports to the US, while two planned to leave the market entirely.”
Dave Fong sells products “from schoolbags to Bluetooth speakers” and has already raised prices in the US by up to 30 percent, the article said. “For us and anyone else, you can’t rely on the US market, that’s quite clear,” Fong told Reuters. “We have to reduce investment, and put more resources into regions like Europe, Canada, Mexico, and the rest of the world.”
Products already shipped to Amazon fulfillment centers in the US soften the blow temporarily, but Shenzhen-based seller Brian Miller “anticipated he and other sellers would need to raise prices steeply when current inventories run out in one or two months.”
“Building blocks for children that sell on Amazon for $20 that cost his company $3 to produce would now cost $7 including the tariff. Maintaining margins would require raising the price by at least 20 percent, and prices for higher-cost toys might see 50 percent increases, he said,” according to Reuters. Miller said that if the tariffs aren’t changed, “manufacturing that serves the US will have to be transferred to other countries like Vietnam or Mexico.”
Bloomberg reported yesterday that Amazon “canceled orders for multiple products made in China and other Asian countries.”