Marketplace Briefing: Amazon sellers face new financial hit as Trump’s tariffs add to rising fees
This is the latest installment of the Marketplace Briefing, a weekly Modern Retail+ column about the ever-changing e-commerce marketplace landscape. More from the series →
Chuck Gregorich has spent nearly 20 years selling hammocks, patio furniture and thousands of other China-made products on Amazon. But now, President Donald Trump’s tariff blitz has upended the math behind his entire business model.
In a matter of weeks, the Wisconsin-based merchant, who runs an eight-figure business on Amazon, found himself staring down a staggering $2.7 million in new tariff costs. Gregorich’s calculations factored in a 25% tariff on steel goods, a 10% levy on all imports from China that went into effect in February and an additional 10% tax on goods from China that Trump announced a few weeks later, and which went into effect on Tuesday.
Separately, a sweeping 25% tariff on imports from Mexico and Canada took effect on Tuesday, as well. Meanwhile, U.S. trade officials are now considering new fees on Chinese vessels entering American ports, a move that could further drive up shipping costs from China.
The timing couldn’t be worse. Amazon merchants were already grappling with a wave of new seller fees the e-commerce giant introduced about a year ago — increases that triggered widespread outrage and even caught the attention of the Federal Trade Commission. Now, with Trump’s tariffs piling on, Amazon sellers are left scrambling to manage yet another costly curveball.
“Those fees were really painful last year,” Gregorich said. “The whole system is just getting tighter.”
For Amazon sellers, the most obvious solutions all come with serious downsides. Raising prices risks losing customers. Moving production to new factories means paying for expensive sourcing trips and quality checks. Stockpiling inventory ties up valuable cash. And without the bargaining power of major retailers to push costs onto suppliers, small sellers are left shouldering the burden themselves.
“The biggest hit on tariffs is going to be not on the public companies, but on small U.S. businesses that have been built largely on sourcing from China because they don’t have other options,” said Sky Canaves, a retail analyst at eMarketer. “They might not be able to absorb price tariff costs as easily as larger retailers and brands can.”
Amazon is better shielded from immediate tariff fallout than its sellers, who account for roughly 60% of sales on the e-commerce platform and will bear the brunt of cost increases. But the company could still feel the impact if slower sales reduce the commissions and fees it collects from merchants.
Morgan Stanley analysts estimated that Amazon has 25% direct exposure to China, based on Morgan Stanley’s own calculation using the cost of goods sold for Amazon first-party merchandise. And nearly half of Amazon’s 10,000 largest third-party sellers are China-based, according to Marketplace Pulse.
Amazon did not respond to Modern Retail’s request for comment by press time.
Supply chain shake-up
Gregorich isn’t new to the tariff game. When Trump first imposed taxes of up to 25% on Chinese imports during his first term, Gregorich realized he couldn’t afford to keep operating as usual. At the time, practically all of his products came from Chinese factories. Over the years, he diversified his supply chain across a dozen countries, but he ramped up the effort last fall when it became clear Trump would likely return to office.
Gregorich flew to countries like Vietnam and India every six weeks, visiting 40 factories to shift production out of China. By March, 75% of new orders will come from outside China. Even with all that effort, Gregorich estimates tariffs will still cost him as much as $1.3 million this year — down from the initial $2.7 million he previously estimated, but still a costly burden. Steel products, like fire pits and hammock stands, are harder to relocate, leaving Gregorich still exposed to a 25% tariff.
“If I didn’t start moving on this back in October, I’d be completely underwater right now,” Gregorich said.
Gregorich’s quick maneuvering is a luxury many other Amazon sellers simply can’t afford — either because they lack the necessary scale, time or expense, or because their product categories are locked into China’s dominance. That’s the case for Greg Shugar, who runs a Vermont-based neckwear business, Beau Ties of Vermont.
The silk Greg uses to make his ties has no American substitute — the world’s silk production is concentrated in China, with Italy the only other viable option. But even Italian factories often use Chinese silk, he said. “There’s nowhere else to get it,” he said. “So we get hit with the tariff every time we import our fabric.”
That means Shugar’s American-made ties — exactly the kind of product Trump’s tariffs were meant to support — are still paying the price. “It’s just this incredibly simplistic view of global trade,” Shugar said. “It’s not like you can just flip a switch and start sourcing everything in America. The materials simply don’t exist here.”
To soften the blow, Shugar stockpiled inventory ahead of the holidays to delay the tariff hit. But that created a different problem — tying up cash flow in inventory that now sits idle in warehouses. “It’s not just the tariffs themselves,” Shugar said. “It’s the uncertainty that kills you. I can’t plan, I can’t invest. Everything’s on hold.”
Amazon’s fee squeeze
Even without tariffs, Amazon sellers have been under strain from a steady drumbeat of fee hikes. Last year, Amazon hiked the fees it charges sellers who use its Fulfillment by Amazon, also known as FBA. In exchange for various fees through FBA — which can include charges for listings, inventory storage, shipping and advertising — sellers get access to Prime shipping, making their products more enticing to customers.
To cope, Gregorich moved two-thirds of his sales off FBA and into Seller Fulfilled Prime, where he could ship directly to customers while retaining the coveted Prime badge. For his best-selling product, Gregorich cut his shipping cost from $67 per unit with FBA to just $24 by handling fulfillment himself. That saved him about 20% in margin — a critical buffer against Amazon’s rising fees.
Gregorich isn’t alone.
Brandon Fuhrmann, who has been selling kitchen products on Amazon for about 10 years, trimmed roughly 25% of his product catalog after the new fees went into effect — cutting items that were no longer profitable to sell. Now, with tariffs adding another layer of cost, the Long Island, New York-based entrepreneur expects further cuts. “When it comes time to reorder, I’ll have to sit down and look at each product and ask: Is this still worth selling?” Fuhrmann said.
Georgia-based Fred McKinnon, a veteran Amazon seller who also runs an Amazon agency, owns multiple brands, including an outdoor gear brand. For his outdoor products — many made from steel — the math simply doesn’t work anymore. With steel tariffs piling up alongside Amazon’s fees, McKinnon is now planning to either sunset the brand or sell it outright.
The uncertainty is already killing deals, McKinnon added. One colleague was in the final stages of selling a sporting goods brand, but the buyer walked away at the last minute — spooked by tariff uncertainty and worried that future margins would evaporate, he said.
Many sellers raised prices a year ago because of Amazon’s fee increases, and they also expect to raise prices again to lessen the blow of Trump’s tariffs. But on Amazon’s ultra-competitive marketplace, that’s easier said than done. Several sellers worry that shoppers, stretched thin by inflation, simply won’t tolerate more price hikes.
Matthew Snow, the chief creative officer of the California-based gift brand Boredwalk, said his team is watching for signs of softening demand. “Even if tariffs only hit our costs indirectly, they’ll hit the whole economy directly,” Snow said. “That means our customers have less to spend on stuff like funny T-shirts and party games.”
Snow’s supply chain stretches across the U.S., Mexico, Canada and China, leaving him exposed to tariffs from all sides. “We need all the margin we can get,” he said. “And it’s disappearing.”
What I’m reading
- Amazon is testing video ads in Rufus, its AI shopping assistant, per Adweek.
- Reddit co-founder Alexis Ohanian signed onto Frank McCourt’s effort to buy TikTok, per Reuters.
- TikTok is looking to expand its local services business in the U.S., according to job postings and sources familiar with the company’s plans cited by Axios.