Impact of Tariffs on Amazon: An Investor's Perspective

The stock market reacts negatively to President Trump's tariff plan. Amazon, notably affected, is down significantly. However, the company's robust AWS division could mitigate risks, making it a potential buy for investors.

Date: 11-04-2025

AI Rating: 6

The report highlights that Amazon's stock has been adversely impacted by President Trump's tariff plan, with a considerable drop of over 10% post-announcement and over 20% since the year's start. The reason for this decline is rooted in the 34% tax on Chinese imports, which creates concerns about increased costs for sellers that are likely to be passed on to consumers.

Earnings Outlook: While specific EPS data isn't mentioned, the discussion about operating income—especially from AWS—indicates relative strength. AWS's projected operating income of $39.8 billion in 2024 forms 58% of Amazon's total operating income, suggesting it remains a cornerstone for profitability.

Revenue Growth: The analysis suggests that AWS, being less exposed to tariffs, may help maintain revenue growth for Amazon amidst the threat of decreased consumer spending. This continued revenue stream from AWS could help counterbalance losses incurred from traditional e-commerce aspects affected by tariffs.

Net Income and Profit Margins: The impact on net income related to tariffs might not be as severe due to AWS's protection from physical goods tariffs, meaning profit margins may remain stable. AWS continues to solidify its position as a lucrative segment, and while there may be slight cost increases for imported components, these costs seem manageable against the significant income generated.

Strategic Positioning: The report points to a potential shift where businesses might increasingly utilize Amazon's logistics services due to rising operational costs enforced by tariffs. This could enhance Amazon's revenue streams further, essentially compensating for losses in other areas caused by diminished consumer spending.

Long-Term Prospects: Historical performance shows that buying Amazon during dips has been beneficial. Although the current situation is linked to tariff issues, Amazon's substantial growth over the last two decades gives investors reason to remain optimistic. The report emphasizes Amazon's resilience, suggesting that any short-term declines might eventually lead to substantial long-term gains.

Stocks: AMZN