Amazon shoppers trade down as tariff stockpiles run dry

Amazon shoppers are switching to cheaper products as prices climb following the expiration of inventory stockpiles that retailers built up to shield themselves from Trump's tariffs, according to Amazon CEO Andy Jassy.

Retailers and sellers spent months absorbing tariff costs by relying on products purchased before the new import taxes took effect. Now that those supplies have dried up, companies are forced to choose between cutting profits or raising prices on consumers. Most are choosing to raise prices, Jassy said in recent comments to investors and analysts.

The shift marks a turning point in how tariffs are affecting everyday shopping. For months, the impact remained largely hidden from consumers as businesses drew down pre-tariff inventory. Now that buffer is gone, and the real costs are starting to show up at checkout.

Background

When President Trump announced sweeping tariffs on imported goods, retailers scrambled to get ahead of the increases. Companies placed bulk orders in early 2025, purchasing inventory before new taxes kicked in. This strategy worked for a time, allowing businesses to sell products at existing prices while absorbing the tariff costs themselves.

The tariff structure is significant. Trump left in place a blanket 10 percent tax on nearly all imports, a 25 percent tariff on steel and aluminum products, and increased tariffs on Chinese goods to 25 percent. While Trump paused some "reciprocal" tariffs for 90 days, the core import taxes remain in effect.

Amazon's marketplace is particularly exposed to these tariffs. Many of the roughly 2 million independent sellers on Amazon's platform source products from China or buy from middlemen who import from China. These sellers now face higher costs that they cannot absorb indefinitely.

Key Details

The Inventory Cliff

Jassy confirmed that most of the pre-tariff inventory stockpiles ran out in the fall of 2025. This timing is critical because it marks when retailers lost their primary tool for managing tariff costs. Without that cushion, the economics of retail force a reckoning.

Retail operates on thin profit margins, typically in the mid-single digits. When input costs rise by 10 percent, there is nowhere to hide the increase. A retailer cannot absorb a 10 percent cost increase when their entire profit margin is 3 to 5 percent. The math is simple: they must either raise prices or accept lower profits.

"Depending on which country you're in, you don't have a 50% extra margin that you can play with. I think they'll try to pass the cost along." – Andy Jassy, Amazon CEO

Consumer Behavior Shifts

Customers are responding to higher prices by trading down to cheaper brands and products. Jassy noted that shoppers are actively seeking lower-priced alternatives wherever they can find them. This behavioral change could have lasting effects on how consumers shop and which brands they choose.

Some consumers also changed their buying habits in anticipation of price increases, stocking up on items before tariffs fully took effect. However, Jassy said it remains unclear whether this buying surge represents a lasting shift or simply a temporary anomaly in the data.

Amazon's Unique Position

Amazon faces a different challenge than traditional retailers. The company operates a massive marketplace where both U.S.-based and China-based sellers compete directly. Jassy suggested that tariffs may actually benefit Amazon's marketplace because Chinese sellers who source directly face lower total costs than U.S. retailers who buy through middlemen.

When U.S. sellers are forced to raise prices or exit the market, Chinese sellers can potentially capture that market share. For Amazon, this means the marketplace continues functioning even as individual sellers struggle. However, this does not mean Amazon itself avoids tariff impacts. The company also carries its own inventory and must decide whether to absorb costs or raise prices.

Jassy emphasized that Amazon generates over 150 billion dollars in annual revenue from seller fees. Whether those sellers are based in the United States, China, or elsewhere matters less to Amazon's business model than whether the marketplace remains vibrant and competitive.

What This Means

The end of the inventory buffer represents a structural shift in how tariffs will affect consumers. For the first time since tariffs took effect, Americans will see consistent price increases across a wide range of imported goods. This is not a temporary blip but a lasting change in the cost of doing business.

Consumers will likely continue switching to cheaper brands and products as prices rise. This could reshape consumer preferences and brand loyalty in ways that persist even if tariffs are eventually reduced or eliminated. A customer who switches to a cheaper brand during a period of high prices may not switch back even if prices fall later.

For retailers and sellers, the pressure is immense. They must balance the need to remain competitive with the need to maintain profitability. Some will choose to absorb costs and accept lower margins. Others will raise prices and risk losing customers. A few may attempt to shift sourcing to countries not subject to high tariffs, though this takes time and money.

Amazon's role as a middleman is increasingly exposed. The company can no longer present itself purely as a price stabilizer for consumers. Instead, it must navigate between keeping prices low and protecting its own thin profit margins. How Amazon manages this balance will likely determine whether the company thrives or struggles in the tariff environment.