Will Amazon Be a Victim of the Trade War?

Photo by Peter Muniz via Unsplash

Morgan Stanley has figured out that about 25% of the cost for Amazon's own products comes from China, making the company a prime target for tariffs. Ouch!

In a plot twist, Amazon is now eyeing the crown to possibly dethrone Walmart as the world’s top dog by quarterly revenue—a title Walmart's been holding onto like a dog with a bone for over ten years. But don't get too comfy, folks, because the retail world is as stable as a Jenga tower at a toddler's birthday party.

The newly minted global retail champ is finding itself caught in a messy trade spat right at the start of Trump’s second term. Talk about timing!

Shoppers Without Borders

While Mexico and Canada might dodge tariffs for about a month (lucky ducks!), the Trump administration is thinking about starting a new trade tiff with Europe. Meanwhile, it's still playing hardball with China. So far, this has led to a 10% tariff on Chinese imports, which is a lot less scary than the 60% import tax Trump once hinted at. Plus, Trump 2.0 axed the de minimis exemption, which let overseas goodies under $800 slip by without duties. This loophole was the secret sauce for budget e-commerce champs like Shein and Temu, and Amazon's new rival service, Haul.

According to MarketPulse, almost a third of the top 10,000 third-party sellers on Amazon are chilling in China. Meanwhile, Morgan Stanley analysts just dropped a note saying Amazon's own products are knee-deep in China. Translation: The world's e-commerce king might be gearing up for some serious turbulence:

• Morgan Stanley reckons about 25% of the cost for Amazon’s own products comes from China, making it a tariff magnet. Amazon’s own stuff makes up just under half of everything sold on the site. Yikes! 

• This 25% is way higher than the 10% average for e-commerce platforms, says Morgan Stanley. Fashion retailer Revolve came in second with 22% exposure, while eBay is at 11%, and Etsy is chilling at 3%.

Still, Amazon’s massive size gives it some perks, especially now that the de minimis loophole is history. “I think [the de minimis rule change] is a win for big guys like Walmart and Amazon over bargain hunters,” said Greg Zakowicz, a senior e-commerce whiz at Omnisend, to Black Investors Coalition. “These companies are what shoppers want: value. Who knows what’ll happen next?”

Upstream: Amazon’s fourth-quarter results were better than expected on Thursday, but they gave a not-so-great forecast for the current quarter. They blamed it on “a big, bad impact” from foreign exchange rates, thanks to the White House's tariff tango and the mighty US dollar. And folks, this is just the opening act.