President Donald Trump's tariffs have been whipsawing the stock market for weeks now, pushing the S&P 500 and the Nasdaq Composite into a correction as investors struggle to divine the impact of the ongoing trade war.
While stocks have sold off broadly on the news, some names have gotten hit harder than others. One big-name stock that has fallen more than 20% from its peak is Amazon (AMZN +0.26%), the "Magnificent Seven" member that dominates both e-commerce and cloud computing.
Now, one well-known billionaire is calling out Amazon's tariff risk. Mark Cuban, a tech entrepreneur who's known for his role on the TV show Shark Tank and as the former owner of the NBA's Dallas Mavericks, recently said on the social media site Bluesky that the current tariff situation could get "ugly" for Amazon:
If these tariffs stick, it's going to be ugly for Amazon, but incredible for all the American sellers
-- Mark Cuban (@mcuban.bsky.social) April 5, 2025 at 9:43 PM
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Just how vulnerable is Amazon to Trump's tariffs? Let's explore what an extended trade war could mean for the tech giant.
Amazon's not-so-secret vulnerability
Amazon has built a far-reaching business empire, but the company isn't immune to the business cycle. In fact, it has more exposure to economic slowdowns than retail peers like Walmart or Costco Wholesale because nearly all of its e-commerce sales come from discretionary products like books, electronics, or clothes and accessories. While both Walmart and Costco make a majority of their revenue from consumer staples like groceries, Amazon earns only a small fraction of its revenue from groceries and other staples.
Amazon Web Services, its cloud computing service that has typically been its primary engine of profits, is also vulnerable to a recession, as its growth depends on business expansion and formation.
Therefore, tariffs on China could impact Amazon in two ways. First, they will make it more expensive for the retailer and its marketplace sellers to import Chinese goods. Second, a recession or an economic downturn could slow both consumer and business spending, affecting its business across the board.
Image source: Getty Images.
Amazon's tariff exposure
It's only been a few weeks since the trade war with China took off, but there are already signs that the new tariffs are affecting Amazon.
Third-party sellers have been forced to raise prices on imports from China to accommodate the new import taxes. SmartScout, the e-commerce data company that made the chart shown in Mark Cuban's post above, found that prices on 930 products it tracked (in categories like clothing, electronics, and toys) rose 29% on average since April 9. Amazon responded by saying that fewer than 1% of the items referenced had their prices increased.
If SmartScout's research is accurate, its chart shows that tens of billions of dollars in Amazon Marketplace sales are at risk from the tariffs, as China is a significant source of many of Amazon's product categories.
Nearly three quarters of Amazon's e-commerce revenue comes from North America, showing its significant exposure to the American market. Third-party sellers that are struggling with tariffs are likely to cut back on advertising spending on Amazon, a significant source of profits for the company.
The silver lining for Amazon on tariffs is that the majority of its operating income comes from Amazon Web Services (AWS), and services can't be tariffed. Still, economic uncertainty could slow down growth in that business, which happened in 2022, the last time fears of a recession hit the stock market.
NASDAQ: AMZN
Key Data Points
Is Amazon in trouble?
If the tariffs on China remain, Amazon and its third-party sellers are likely to be among the most affected due to the company's size and its exposure to China.
However, there is good news for investors: Much of the risk facing Amazon seems to already be priced in to the stock. It's about as cheap as it's ever been on a price-to-earnings (P/E) basis, trading at a multiple of just 34, which is only a modest premium to the S&P 500. At that price, investors do expect growth from the company, but it's not like the days when the stock was trading at a triple-digit P/E valuation.
We'll learn more when Amazon reports first-quarter earnings next Thursday. While the company is certainly vulnerable to tariffs, its long-term competitive advantages should remain intact no matter what happens with trade policy.
