Amazon is pressing suppliers for steep discounts and renegotiating contracts to shield its bottom line from fresh US tariffs on Chinese imports, reigniting a playbook last used during Donald Trump’s first term as president, the Financial Times reported.
The Seattle-based ecommerce giant has asked for low double-digit price cuts from vendors across categories such as homeware and consumer electronics, according to three vendor consultants who represent multiple suppliers, FT said.
The pressure has been especially sharp for suppliers sourcing goods from China, where tariffs of up to 145% have been reimposed by the White House.
“Amazon is the 800-pound gorilla in the room,” said Scott Miller, a consultant and former Amazon vendor manager.
Brands have grown dependent on the platform and have little choice.
Amazon revives strategy from prior trade war
Amazon’s tactics echo those deployed during Trump’s first presidency, when tariffs on Chinese goods forced retailers to adjust rapidly.
The company is now using its scale to shift costs down the supply chain, joining big-box rivals like Walmart and Costco in seeking relief from vendors.
Goldman Sachs analysts estimate the new tariffs could shave between $5 billion and $10 billion from Amazon’s operating profit this year—a decline of 6 to 12% depending on the scope and duration of the trade dispute.
In a statement, Amazon said it was “working with our broad, varied range of valued selling partners in our store to support them in adapting to the developing environment while maintaining low prices for customers.”
Pre-emptive measures: shift in sourcing strategy and tougher terms
To mitigate the fallout, Amazon has taken pre-emptive steps, including cancelling large volumes of direct imports from China and advancing shipments ahead of the new tariffs.
According to two consultants, the company has shifted its purchasing focus to suppliers that already hold stock within the US.
For non-China imports, Amazon has reportedly been willing to absorb up to a third of tariff costs, which were at 10% during a recent 90-day pause.
However, such concessions are conditional: Amazon demands fixed-margin agreements, under which vendors must absorb any shortfall if an item sells at a discount.
“To their credit, they have been willing to absorb some of the increased costs,” said Miller.
Jassy signals price hikes, but fights to soften impact
Amazon chief executive Andy Jassy acknowledged in a recent CNBC interview that third-party sellers on the marketplace would likely raise prices.
However, he said Amazon was actively renegotiating supplier contracts to minimise the impact on consumers.
“There are some cases where we have deals we negotiated that weren’t done where we’ll renegotiate terms to make it easier for customers to have lower prices,” Jassy said.
Outlook uncertain ahead of key earnings and Prime Day
Amazon, whose shares are down nearly 15% this year, is due to report its first-quarter earnings on Thursday, with investors closely watching for signs of tariff-related margin erosion.
Analysts are also monitoring the upcoming summer ‘Prime Day’ sales event, traditionally a key revenue driver.
Eric Sheridan, an analyst at Goldman Sachs, said the event is likely to see more subdued promotions this year.
“There will be some costs that have to be borne… a degree of which is passed along to the consumer,” he said.
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