Economic reality can only be denied for so long in an uncertain time until it becomes too obvious to continue to postpone, especially when the consequences affect millions of consumers. If it sounds like something fundamental has changed at Amazon, that’s because it has.
For more than three decades, Amazon has been a trusted source for fast delivery and affordable prices. But recently, a major aspect of its business has come under pressure from forces beyond its control.
In July 2025, Amazon CEO Andy Jassy downplayed concerns about the tariffs during an earnings call, saying it was too early to conclude that media reports were “false and misreported” on their impact on retail prices and consumption.
“We have not yet seen demand decline, nor prices appreciating in a meaningful way,” Jassi said. “We also have such a variety of sellers in our marketplace, more than 2 million sellers in total, with different strategies for whether or not to pass on higher costs to consumers. Customers benefit from shopping on Amazon because they are more likely to find lower prices on the items they love.”
However, after 6 months, Jassi’s voice has changed. Now, he’s warning consumers of an unfortunate reality.
In a recent interview with CNBC, Jassi acknowledged that consumers’ behavior has changed as they remain flexible and continue to spend. Shoppers are actively looking for bargains, which slows sales of high-priced discretionary items.
At the same time, Amazon’s continued investment in faster delivery is helping consumers buy everyday essentials. However, these products are essential items that people continue to buy even when prices rise.
To mitigate the impact of the tariffs, Amazon made extensive pre-purchases in early 2025, allowing it to keep prices stable compared to many competitors. With a global network of warehouses and distribution centers, the company was able to import and store goods in bulk before anticipated cost increases.
But that excess supply ran out in the fall.
While some of its third-party vendors have chosen to absorb higher costs to maintain market share, others are passing them on to consumers, resulting in some price increases.
“So you start to see some fees creep up on some prices, some items,” he said. “Some sellers are deciding that they’re going to pass those higher costs on to consumers in the form of higher prices, some are deciding that they’re going to absorb it to drive demand and some are doing something in between.”
Jassi blamed U.S. tariffs as the primary driver of the price hike, as it raised the cost of imported goods.
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Tariffs are catching up with Amazon.Shutterstock ·Shutterstock
According to research by the Kiel Institute for the World Economy, foreign exporters bear less than 4% of the tax burden, with the remaining 96% going to American buyers.
“The claim that foreign countries ‘pay’ these tariffs is a myth,” said Kiel Institute for the World Economy research director Julian Hinz. “Tariffs, in the most literal sense, are their own goal. Americans are footing the bill.”
The current effective tariff rate on all imports stands at about 17%, the highest since 1935, largely due to the implementation of a 10% “reciprocal” tariff, according to a study by Yale’s Budget Lab.
An Econofact study showed that the price of imported consumer goods increased by an average of 5.4 percent, while the price of domestic goods increased by 3 percent. Although these numbers are modest compared to the announced tariff rates, their cumulative effect on inflation is significant.
Econofact estimates that pass-through tariffs, which are tariff costs passed from importers to consumers, contributed about 0.7 percentage points to the annual U.S. inflation rate, which was 2.7% by December 2025.
From a macroeconomic perspective, higher commodity prices push up consumer price index (CPI) readings, complicate the Federal Reserve’s (Fed) ability to ease monetary policy and keep borrowing costs high, putting further pressure on both consumer and corporate margins.
“Taken individually, slower tariff pass-through, tightening labor supply, looser fiscal policy, and accommodative fiscal conditions will generally push inflation higher,” said Peter Orszag, CEO of Lazard and a board member of the Peterson Institute and Adam Posen, president of The Peterson Institute for International Economics. “Inflation above 4 percent by the end of 2026 is not only likely, but also the most likely scenario.”
Despite the challenges, Jassi also offered some cautiously optimistic news. He said Amazon is working with its distribution partners to keep prices as low as possible, which the company claims has always been a primary focus, but acknowledged the limits of that strategy.
“We’re going to do everything we can to work with our sales partners to keep prices as low as possible for consumers, but you don’t have endless options.”
More retail news:
For now, consumers continue to spend. In the third quarter of 2025, Amazon reported net sales growth of 13% year over year to $180.2 billion, with North America at 11%. Still, cost of sales rose by 9.5%, underscoring growing margin pressure.
Amazon ( AMZN ) is not alone in its struggles. Major U.S. retail rivals are also warning customers that higher prices are becoming inevitable as tariff-related costs pile up.
Walmart (WMT): CEO Doug McMillan said during an earnings call in May 2025 that the company may not be able to absorb all of the tariff-related costs given narrow retail margins. (Source: Walmart)
Target (TGT): CEO Brian Cornell warned of “significant potential costs” due to the tariffs, adding that a price increase would be a last resort during an earnings call in May 2025. (Source: Target)
Best Buy (BBY): CEO Cory Barry confirmed price increases on select products to offset the tariffs in May 2025. (Source: Wall Street Journal)
Home Depot (HD): CFO Richard McPhail said the tariffs are causing modest price increases in some categories. (Source: CNN)
Related: Consumers fear rising prices, product shortages
This story was originally published by TheStreet on January 23, 2026, where it first appeared in the Retail section. Add TheStreet as a preferred source by clicking here.
