Economic reality can only be denied for so long in uncertain times until it becomes too obvious to continue delaying, especially when the consequences affect millions of consumers. If it feels like something fundamental has changed at Amazon, that’s because it has.
For more than three decades, Amazon has been a trusted source of fast delivery and affordable prices. But recently, a key aspect of his business has come under pressure from forces beyond his control.
In July 2025, Amazon CEO Andy Jassy downplayed concerns about the tariffs during an earnings call, calling media reports about their impact on retail prices and consumption “wrong and misreported,” saying it was too early to draw conclusions.
“We haven’t seen a drop in demand yet, nor has the price appreciated significantly,” Jassy said. “We also have such a diversity of sellers on our marketplace, over 2 million sellers in total, with different strategies to pass on higher costs to consumers, customers benefit when shopping on Amazon because they’re more likely to find lower prices on the items they care about.”
However, six months later, Jassy’s tone has changed. Now, he’s warning consumers about an unfortunate reality.
In a recent interview with CNBC, Jassy acknowledged that while consumers remain resilient and continue to spend, their behavior has changed. Shoppers are actively looking for bargains, leading to slower sales of higher-priced discretionary items.
At the same time, consumers are buying more everyday essentials thanks to Amazon’s continued investment in faster delivery. However, these products are necessary goods that people will continue to buy even if prices rise.
To soften the impact of the tariffs, Amazon has done extensive pre-purchasing in early 2025, allowing it to keep prices constant longer than many competitors. With its global network of warehouses and distribution centers, the company was able to import and stock bulk goods ahead of anticipated cost increases.
But that extra supply ran out in the fall.
While some of its third-party sellers have chosen to absorb the higher costs to maintain market share, others pass them on to consumers, resulting in some price increases.
“So you’re starting to see some of the tariffs creep into some of the prices, some of the items,” he said. “Some sellers decide to pass these higher costs on to consumers in the form of higher prices, some decide to absorb them to stimulate demand, and some do something in between.”
Jassy blamed the US tariffs as a main driver of the price hike as they increased the cost of imported goods.
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Rates are catching up with Amazon.Shutterstock ·Shutterstock
Foreign exporters absorb less than 4 percent of the tariff burden, with the remaining 96 percent being passed on to U.S. buyers, according to research by the Kiel Institute for the World Economy.
“The claim that foreign countries are ‘paying’ these tariffs is a myth,” said Julian Hinz, research director of the Kiel Institute for the World Economy. “Tariffs are, in the most literal sense, an end in themselves. Americans are footing the bill.”
The current effective tariff on all imports is about 17 percent, the highest since 1935, largely due to the implementation of the 10 percent “reciprocal” tariff, according to a study by The Budget Lab at Yale.
An EconoFact study found that prices of imported consumer goods rose an average of 5.4 percent, while domestic goods rose 3 percent. Although these figures are moderate relative to the announced tariff rates, their cumulative impact on inflation was significant.
EconoFact estimates that pass-through tariffs, which are tariff costs transferred from the importer to the consumer, contributed about 0.7 percentage points to the annual U.S. inflation rate, which was 2.7% in December 2025.
From a macroeconomic perspective, higher commodity prices push up the consumer price index (CPI), complicating the Federal Reserve’s (Fed) ability to ease monetary policy and keep borrowing costs high, further squeezing both consumers and corporate margins.
“Taken individually, delayed tariff pass-through, tightening of labor supply, looser fiscal policy and accommodative financial conditions would push inflation modestly higher,” said Lazard CEO and Peterson Institute board member Peter Orszag and Peterson Institute for International Economics President Adam Posen. “Inflation rising above 4% by the end of 2026 is not only plausible, but probably the most likely scenario.”
Despite the challenges, Jassy also gave some cautiously optimistic news. He said Amazon works closely with its distribution partners to keep prices as low as possible, which the company says has always been a primary goal, but acknowledges the limits of that strategy.
“We’ll do everything we can to work with our sales partners to make prices as low as possible for consumers, but you don’t have endless options.”
More retail news:
For now, consumers keep spending. In the third quarter of 2025, Amazon reported net sales growth of 13% year-over-year to $180.2 billion, with North America up 11%. However, cost of sales rose 9.5%, underscoring increasing pressures on margins.
Amazon ( AMZN ) isn’t alone in its struggles. Major US retail rivals are also warning customers that higher prices are becoming inevitable as tariff-related costs pile up.
Walmart (WMT): CEO Doug McMillon said the company can’t absorb all of the costs related to the tariffs given tight retail margins during a May 2025 earnings call. (Source: Walmart)
Target (TGT): CEO Brian Cornell warned of “massive potential costs” from the tariffs, noting that price increases will be a last resort during an earnings call in May 2025. (Source: Target)
Best Buy (BBY): CEO Corie Barry confirmed price increases on certain products in May 2025 to offset the tariffs. (Source: The Wall Street Journal)
Home Depot (HD): CFO Richard McPhail said modest price increases are coming in some categories due to tariffs. (Source: CNN)
Related: Consumers fear rising prices, product shortages as tariffs loom
This story was originally published by TheStreet on January 23, 2026, where it first appeared in the Retail section. Add TheStreet as a favorite source by clicking here.
