Trump's new tariff will help Chinese Amazon sellers gain another victory

Trump's new tariffs may provide an opportunity for Chinese Amazon sellers to further expand their market share, while American Amazon sellers and traditional retailers in the U.S. could face greater challenges.

Let’s take a moment to reflect on the past. In July 2018, after the Trump administration implemented tariffs, sales from Chinese sellers skyrocketed by 174% year-over-year, significantly outpacing the 124% growth of their American counterparts. By March 2019, when tariffs covered $250 billion worth of goods, Chinese sellers saw a remarkable 61% increase in annual sales, while American sellers experienced a decline of 3%. According to Marketplace Pulse, over half of Amazon's registered sellers in 2024 are from China. Many experts, including myself, agree that more than 70% of Amazon's GMV is actually contributed by Chinese sellers, as many of them are now using U.S. companies to sell on Amazon.

I believe that after this round of tariffs, Chinese sellers may gain a dominant advantage for several reasons:

1. Supply Chain Flexibility: Chinese sellers are generally better at leveraging flexible supply chains compared to their American counterparts. For instance, at the recent VIFA exhibition in Vietnam, thousands of Chinese Amazon sellers attended, many of whom have already established production networks in Southeast Asia. They maintain close ties with their factory suppliers, often splitting manufacturing processes—bulk purchasing components in China and then processing them in Vietnam or Malaysia. This contrasts with many American sellers who still rely on single, straightforward Chinese suppliers, giving Chinese sellers a clear edge post-tariff.
2. Market Adaptation: Platforms like Temu, impacted by the elimination of the $800 De minimis tax exemption, are redirecting their merchants to shift goods to the U.S. under a "semi-managed" model, naturally increasing the number of merchants exploring Amazon as an additional sales channel. Given that Temu sellers enjoy a significant price advantage, this shift could erode the competitive edge of existing Amazon sellers.
3. Cost Structure: Tariffs inevitably squeeze the profits of intermediaries and push consumers to bear a larger share of costs. In this environment, the lower operational costs of Chinese sellers make them more resilient. During 2020-2023, I assisted many FBA aggregators like Thrasio in acquiring Chinese FBA brands and discovered that many post-acquisition issues arose from aggregators dissolving original operations teams and replacing them with U.S.-based teams. Mature Amazon brands managed by Chinese sellers typically have operational costs that comprise only about 2% of their GMV, while operating those brands in the U.S. could drive costs up to 5% or higher. This higher cost structure, combined with lower profit margins, poses a challenge for American sellers, while Chinese sellers can often demonstrate greater resilience.
4. Diversified Markets: Chinese sellers can not only focus on the U.S. market but also expand into other regions, which helps them maintain bargaining power with suppliers. Some Chinese sellers I know report that about 70% of their business comes from the U.S. However, due to the uncertainty of tariffs, they plan to increase their business in Europe and other regions this year. Even if their U.S. operations are not profitable, they can subsidize losses with profits from other markets. After all, Trump’s term is limited to four years, whereas Amazon will continue to operate. Maintaining long-term relationships with suppliers necessitates ongoing procurement from the U.S. market. In contrast, American sellers may struggle to sustain their businesses at zero profit, while Chinese sellers can endure.
5. In another post, I mentioned that retail giants like Walmart are pushing their suppliers to absorb the costs of these tariffs, but many manufacturers only operate on 5%-10% margins and cannot shoulder this burden. Many factories are seeking alternative sales strategies and becoming Amazon sellers themselves, directly competing with their traditional customers. As these retail giants face challenges, some Amazon sellers will also contend with direct competition from manufacturers that are now leveraging AI technology, making them competitive with established Amazon sellers.

Returning to a fundamental principle of economics, any tightening of the rules governing market competition translates into higher business costs, ultimately leading to one outcome: consumers paying more for goods while sellers earn less profit. Increasing tariffs raises transaction costs, and under these conditions, the sellers most likely to endure are those with lower operational costs and more flexible supply chains—namely, the Chinese sellers.

Due to constraints on length and time, I will stop here. If you would like to discuss the above issues further, including how to maintain a competitive supply chain advantage amid these new tariffs, feel free to reach out to me anytime.

#Ecommerce #Amazon #Tariffs #SupplyChain #BusinessStrategy