New York Times columnist Thomas Friedman wrote in his 2005 best-selling book The World Is Flat that countries are more interconnected than ever before. His premise from 20 years ago is still on target.
One downside of this "flat world" is that the trade policies of one country can cause shockwaves for businesses in other countries. We've seen this happen with President Trump's tariffs and threatened tariffs this year.
But some businesses and stocks are affected by tariffs less than others. Here's how Trump's tariffs could affect Alibaba Group Holding (BABA -2.99%) stock.
E-commerce: Relatively tariff-resistant
Guess how many times Alibaba's executives mentioned tariffs during the company's latest quarterly earnings call? Pat yourself on the back if you answered zero. The only reference that came even close was CEO Eddie WU's mention of "potential uncertainties in global trade regulations."
I think there's a reason why Alibaba's management didn't focus on tariffs like many of their U.S. counterparts. The company generates around 57% of its total revenue from its e-commerce businesses. However, three-fourths of the company's e-commerce revenue comes from its Taobao and Tmall Group operations. These units serve the Chinese market, which wouldn't be directly affected by U.S. tariffs on Chinese imports.
Granted, Alibaba's international digital commerce group contributed roughly 14% of total revenue in the first quarter of 2025. Exactly how much of that revenue stems from the U.S. is uncertain. However, it's fair to say that the company's e-commerce business is relatively (although not completely) tariff-resistant.
Perhaps the greatest impact on Alibaba from Trump's tariffs is an indirect one. The Chinese customers and businesses that use its platforms could feel the pain from retaliatory tariffs imposed by the Chinese government on imports from the U.S.
Cloud services: Tariffs aren't a big issue
Although e-commerce remains Alibaba's biggest revenue source, the company's most important growth driver is its cloud services business. The artificial intelligence (AI) tailwind enjoyed by U.S.-based cloud titans is blowing for Alibaba Cloud, too.
Will U.S. tariffs hurt Alibaba Cloud? Probably not much. For one thing, Alibaba doesn't provide cloud services to customers in the U.S. Even if it did, the tariffs discussed so far apply only to imported products but not services. It's possible, though, that U.S. tariffs could hurt some of Alibaba's Chinese business customers and result in their cutting back on spending for cloud services.
Image source: Getty Images.
While tariffs shouldn't be a big issue for Alibaba Cloud, other Trump administration trade policies might be a different story. For example, Nvidia (NVDA -2.26%) was temporarily barred from shipping any H20 GPUs to China. Although the White House later allowed the company to resume exporting the chips to China, there's no guarantee that further restrictions won't be imposed.
Of course, Alibaba could use other chips to power AI applications. However, Nvidia is an important partner and will likely continue to be as long as its GPUs remain the gold standard for training and deploying AI models.
Overall tariff impact on Alibaba
When all things are considered, President Trump's tariffs could affect Alibaba in some ways, but the Chinese tech giant should be largely unscathed. This assumes, though, that the final tariffs levied on China don't go radically beyond what has been proposed thus far.
Alibaba's greatest threat arguably comes from the Chinese government rather than from the U.S. government. The company's 20-F filing to the U.S. Securities and Exchange Commission acknowledges several ways the government in its home country could negatively affect its business.
These risks are partly to blame for Alibaba's low valuation. Its shares trade at only 14.3 times forward earnings, a much lower multiple than the company's U.S. counterparts. I think this valuation makes the stock a solid pick for long-term investors who aren't overly risk-averse.
