Economic reality can only be denied in uncertain times for so long until it becomes too obvious to continue postponing, especially when the consequences affect millions of consumers. If you feel that something fundamental has changed at Amazon, that’s because it has.
For more than three decades, Amazon has been a reliable source of fast delivery and affordable prices. But recently, a key aspect of its business has come under pressure from forces beyond its control.
In July 2025, Amazon CEO Andy Jassy downplayed concerns about the tariffs during an earnings call, calling media reports about their impact on retail prices and consumption “wrong and misreported,” stating that it was too early to draw conclusions.
“We have not yet seen a drop in demand, nor has the price appreciated significantly,” said Jassy. “We also have such a diversity of sellers in our marketplace, more than 2 million sellers in total, with different strategies of whether to pass on higher costs to consumers, customers are advantaged buying from Amazon because they are more likely to find lower prices on the items they care about.”
However, six months later, Jassy’s tone has changed. Now, he is warning consumers about an unfortunate reality.
In a recent interview with CNBC, Jassy acknowledged that while consumers remain resilient and continue to spend, their behavior has changed. Buyers are actively looking for bargains, leading to slower sales of higher priced discretionary items.
At the same time, consumers are buying more everyday essentials thanks to Amazon’s continued investments in faster delivery. However, these products are necessary items that people continue to buy even if prices rise.
To soften the impact of the tariffs, Amazon did extensive pre-buying in early 2025, which allowed it to keep prices stable for longer than many competitors. With its global network of warehouses and distribution centers, the company was able to import and store goods in bulk before anticipated cost increases.
But that excess supply ran out in the fall.
While some of its third-party vendors have chosen to absorb the higher costs to maintain market share, others are passing them on to consumers, resulting in some price increases.
“So you start to see some of the fees creep into some of the prices, some of the items,” he said. “Some sellers are deciding that they are passing those higher costs on to consumers in the form of higher prices, some are deciding that they are going to absorb it to drive demand and some are doing something in between.”
Jassy blamed the US tariffs as the main driver of the price increases, as they raised the cost of imported goods.
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Foreign exporters absorb less than 4% of the tariff burden, with the remaining 96% passed on to US buyers, according to research by the Food Institute for the World Economy.
“The claim that foreign countries ‘pay’ these tariffs is a myth,” said Kiel’s Director of World Economic Research, Julian Hinz. “Tariffs are, in the most literal sense, self-serving. Americans are footing the bill.”
The current effective tariff rate on all imports is about 17%, the highest since 1935, largely due to the implementation of the 10% “reciprocal” tariff, according to a study by The Budget Lab at Yale.
An EconoFact study found that prices of imported consumer goods rose by an average of 5.4%, while domestic goods rose by 3%. Although these numbers are moderate compared to the announced tariff rates, their cumulative impact on inflation was significant.
EconoFact estimates that pass-through tariffs, which are tariff costs shifted from the importer to the consumer, contributed about 0.7 percentage points to the annual US inflation rate, which was 2.7% as of December 2025.
From a macroeconomic perspective, higher commodity prices raise the Consumer Price Index (CPI), complicating the Federal Reserve’s (Fed) ability to ease monetary policy and keep borrowing costs elevated, putting further pressure on both consumers and corporate margins.
“Taken individually, lagged tariff pass-through, tightening labor supply, looser fiscal policy, and accommodative financial conditions would each push inflation modestly higher,” said Lazard CEO and Peterson Institute board member Peter Orszag and The Peterson Institute for International Economics President Adam Posen. “Inflation rising above 4 percent by the end of 2026 is not only plausible but perhaps the most likely scenario.”
Despite the challenges, Jassy also gave some cautiously optimistic news. He said Amazon is working closely with its distribution partners to keep prices as low as possible, which the company claims has always been a primary focus, but recognizes the limits of that strategy.
“We will do everything we can to work with our sales partners to get prices as low as possible for consumers, but you don’t have endless options.”
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For now, consumers continue to spend. In the third quarter of 2025, Amazon reported net sales growth of 13% year over year to $180.2 billion, with North America up 11%. Still, cost of sales increased by 9.5%, highlighting increasing margin pressures.
Amazon ( AMZN ) is not alone in its struggles. Major US retail rivals are also warning customers that higher prices are becoming inevitable as tariff-related costs accumulate.
Walmart (WMT): CEO Doug McMillon said the company can’t absorb all of the costs related to the tariffs because of tight retail margins during an earnings call in May 2025. (Source: Walmart)
Target (TGT): CEO Brian Cornell warned of “massive potential costs” due to the tariffs, noting that price increases will be a last resort during an earnings call in May 2025. (Source: Target)
Best Buy (BBY): Chief Executive Corie Barry confirmed price increases on selected products in May 2025 to offset the tariffs. (Source: The Wall Street Journal)
Home Depot (HD): CFO Richard McPhail said modest price increases are coming in some categories due to tariffs. (Source: CNN)
Related: Consumers fear rising prices, product shortages as tariffs rise
This story was originally published by TheStreet on January 23, 2026, where it first appeared in the Retail section. Add TheStreet as a Preferred Source by clicking here.