Amazon could see up to $10 billion in profits go up in smoke because of Trump tariffs

Key Points

  • Amazon could face a $5 billion to $10 billion annualized operating profit hit due to new tariffs imposed by President Trump.
  • Goldman Sachs analyst Eric Sheridan estimates a 15% to 20% increase in Amazon's US merchandise costs if no mitigating actions are taken.
  • The tariffs are part of a broader trade policy affecting multiple countries, with China facing a total tariff rate of 54%.
  • Amazon's stock has dropped nearly 7% following the tariff announcement, with shares down 20% year to date.
  • Despite the tariff impact, Goldman Sachs maintains a Buy rating on Amazon with a $255 price target, suggesting potential offsets like vendor negotiations and price adjustments.

Summary

President Trump's new tariffs, announced as part of a broader trade policy, are set to significantly impact Amazon's profitability. Analyst Eric Sheridan from Goldman Sachs estimates that Amazon could see an annualized operating profit reduction of $5 billion to $10 billion due to increased costs from these tariffs. The tariffs, which include a baseline rate of 10% starting April 5 and higher rates for certain countries like China, are expected to raise Amazon's US merchandise costs by 15% to 20% if no countermeasures are implemented. Following the tariff announcement, Amazon's stock experienced a nearly 7% drop, positioning it in the middle of the pack among the "Magnificent Seven" tech companies, with Tesla leading the declines. Despite these challenges, Goldman Sachs remains optimistic about Amazon's ability to mitigate the impact through vendor negotiations, price adjustments, and shifting product mixes. The firm holds a Buy rating on Amazon with a price target suggesting significant potential upside.

yahoo
April 4, 2025
Stocks
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