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US-China Trade War Could Hurt Amazon Merchants

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The escalating trade war between the United States and China is leaving many Amazon merchants wondering how to keep their businesses afloat during these uncertain times.

The retailers, which rely on a business model of buying inexpensive goods in China and selling them for a higher price in the U.S., are faced with the decision of whether to place factory orders now and determine pricing in time for the holiday shopping season, which comprises as much as half their annual revenue. While the potential tariffs will impact retailers both big and small, these merchants cannot wait it out, and they don’t have the negotiating power to transfer the tariff costs to their suppliers.

“The smaller companies have a significant problem,” says Joel Sutherland, managing director of U.C. San Diego’s Supply Chain Management Institute, according to Bloomberg. “We have an administration that says one thing today and does something else tomorrow, which poses tremendous risks.”

U.S. President Donald Trump is scheduled to meet Chinese President Xi Jinping for the G20 summit in Osaka, Japan, on June 28-29, where they have agreed to resume trade talks. However, even if an agreement is reached, the trading relationship between the countries has most likely been permanently altered.

“We’re going to assume the tariffs are here to stay,” says Chuck Gregorich, who sells China-made hammocks, patio furniture and 2,000 other products on Amazon. “We can’t have this happen in a year or two and get caught with our pants down again.”

In his attempt to beat a January 1 tariff hike, Gregorich moved up orders and wound up spending an extra $400,000 on shipping only to see the tariff hike delayed. As a result, the merchant is looking to move about 30 percent of his production to factories in Vietnam and elsewhere.

For its part, Amazon has said little about the trade war, and it wasn’t among 600 businesses that wrote the Trump administration earlier this month asking for an end to the matter. However, the eCommerce giant is a member of the Internet Association trade group, which signed the letter. And sources have said that Amazon has agreed to pay some vendors up to 10 percent more for products affected by tariffs.

“Companies of all sizes throughout the supply chain are adjusting to increased costs resulting from new tariffs,” Amazon said in an emailed statement. “We’re working closely with vendors to make this adjustment as smooth as possible.”

 

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