Amazon pushes suppliers for cuts ahead of Supreme Court tariff ruling – Financial Times
Amazon is seeking to cut what it pays suppliers for goods it sells on its ecommerce platform as the tech giant moves to reverse concessions intended to limit the shock of US President Donald Trump’s tariffs.
The $2.6tn Seattle-based group has sought discounts from suppliers ranging from low single digits to as high as 30 per cent, according to several vendor consultants — who negotiate on behalf of multiple brands and suppliers.
Amazon had accelerated talks with some suppliers by several weeks and in individual cases had sought to impose a January 1 deadline, the people said, in a flurry of dealmaking ahead of a Supreme Court ruling on the legality of the US trade levies expected this week.
The ecommerce group said its annual vendor negotiation cycles had not changed and said there was no rigid deadline for talks. It said it had started talks with some suppliers following a reduction in tariff rates for Chinese imports at the end of October.
Amazon last year agreed to increase the price it paid to some suppliers for tariffed goods in return for them guaranteeing minimum margins. This meant that brands would take the hit if an item’s sale price on Amazon’s marketplace fell.
But Amazon now wanted to claw back those concessions made last year, the people said, with the group arguing that US tariffs have been less sweeping than first feared after Trump walked back some levies and cut a series of trade deals.
“Amazon is moving aggressively to recoup any lost profit,” said Kara Babb, a consultant and former Amazon vendor manager.
The technology giant was seeking to shift the risk of further trade volatility on to its suppliers by asking them to agree to take responsibility for paying any duties on goods they sell, the people added.
Amazon has said it would accept smaller discounts from suppliers if they agreed to be on the hook for paying tariffs and spend more on marketing and promotions, they added.
“The narrative from Amazon to brands is that a lot of their worst fears have not materialised,” said Martin Heubel, a consultant who helps suppliers negotiate deals with Amazon.
The US president’s levies on trading partners, launched in April last year, upended global trade relations and threatened the razor-thin margin on which Amazon operates its vast ecommerce business.
Amazon sells goods directly and hosts third-party retailers, which account for more than 60 per cent of sales on its platform.
The group’s negotiations with suppliers for the goods it sells itself are taking place under a cloud of uncertainty as companies await a ruling from the US’s highest court on whether the White House has the authority to impose tariffs under the International Emergency Economic Powers Act.
Trade lawyers and diplomats have warned Trump could launch new tariffs using powers under alternative legislation if the Supreme Court rules against his current levies.
Amazon has not joined any litigation brought by businesses and interest groups against tariff measures, including a lawsuit by more than 1,000 retailers, including Costco, seeking to reclaim duties.
The tech group’s vendor managers — who handle negotiations with brands — have not explicitly referenced the case in discussions but have hastened talks in a move consultants argue is aimed at getting ahead of the future.
Brands and their advisers have argued that Amazon’s stance in its latest negotiations threatens the profitability of product lines as it does not take into account the rising cost of goods stemming from supply chain disruption and higher raw material and labour costs.
Amazon said: “We work closely with vendors to understand all the cost pressures they’re facing — tariffs, supply chain, raw materials, labour — and factor those into negotiations.”
