Amazon CEO Signals End of Tariff Price Absorption Strategy
Amazon CEO Andy Jassy has publicly acknowledged that Trump administration tariffs are beginning to drive up prices on the company’s platform, marking a significant shift from the retailer’s previous messaging about absorbing tariff costs. Speaking at the World Economic Forum in Davos, Jassy revealed that the inventory buffer strategy Amazon and its third-party sellers used to shield consumers from tariff impacts has largely exhausted.
The Inventory Cushion Has Run Out
Throughout 2025, Amazon and its sellers employed a strategic approach to combat tariffs: they front-loaded inventory purchases before tariffs took full effect, then used that stockpile to maintain stable prices while absorbing the margin hit. However, this approach has reached its limits. “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 explained during his interview with CNBC’s Becky Quick.
Three-Pronged Seller Response
The Amazon CEO indicated that sellers are now taking different approaches to handle increased costs:
- Passing costs to consumers through higher prices
- Absorbing costs to maintain demand
- Taking a middle-ground approach between the two extremes
“I think you’re starting to see more of that impact,” Jassy said, acknowledging the visible shift in pricing that consumers will increasingly encounter.
A Stark Contrast to Previous Statements
This represents a notable departure from Amazon’s previous public position. In July 2025, Jassy had told investors that the impact of tariffs on retail pricing had been “misreported,” cautioning that uncertainty would escalate once pre-tariff inventory was depleted. His current statements suggest that moment has arrived.
Why Retailers Have Limited Options
The mathematics of retail margins leave little flexibility. With typical operating margins in the 2-4% range for many product categories, a 10% tariff increase cannot be hidden through logistics optimization or supplier negotiations alone. The costs must ultimately be reflected somewhere—increasingly, that somewhere is the consumer price tag.
Amazon indicated it is collaborating with distribution and selling partners to keep prices “as low as possible” for shoppers, but acknowledged the inherent constraints of the business model.