Amazon CEO says tariffs are starting to drive up prices

Speaking to CNBC on Tuesday, Amazon CEO Andy Jassy stated that tariffs are starting to drive up product prices. This development marks a clear shift from last year, when Jassy said prices had not risen after President Donald Trump announced the tariffs. While Amazon is trying to keep prices low, Jassy indicated that price hikes may be unavoidable in some instances. He noted that the impact of these trade policies is now becoming visible across the e-commerce platform. According to Jassy, tariffs are beginning to creep into some product prices, with some sellers choosing to pass higher costs to consumers, others absorbing them to drive demand, and some taking a middle-ground approach. He added that he thinks consumers are starting to see more of that impact as a result.

To mitigate the immediate impact of the tariffs, Amazon and many of its third-party sellers initially stocked up on inventory to keep prices low. However, Jassy noted that most of this inventory supply ran out last fall, leaving sellers exposed to the added costs. The Amazon executive highlighted the structural challenges of absorbing these expenses in the retail sector, which operates on thin margins. He explained that retail is a mid-single digit operating margin business, meaning that if costs increase by 10%, there are limited options to absorb them. “At a certain point, because retail is, as you know, a mid-single digit operating margin business, if people’s costs go up by 10%, there aren’t a lot of places to absorb it,” Jassy said, adding that businesses do not have endless options.

Despite the mounting price pressures, Jassy observed that consumers remain pretty resilient in the current economic environment. Rather than stopping spending entirely, shoppers are adapting to the price increases by shifting to cheaper items and bargain hunting. Others are choosing to put off premium discretionary purchases. This behavioral shift suggests that while consumer demand remains, the composition of consumer spending is changing as higher costs are passed down to the public.

Why it matters

This marks a pivot for Amazon, which previously maintained that prices remained stable despite tariff announcements. It highlights the thin margins of retail and the limits of corporate inventory management in the face of sustained trade policy changes.