For only so long can economic reality be denied in uncertain times until it becomes too obvious to continue postponing, especially when the consequences affect millions of consumers. If it feels like something fundamental has shifted at Amazon, that’s because it has.

For more than three decades, Amazon has been a dependable 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 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 haven’t yet seen diminishing demand, nor price is meaningfully appreciating,” said Jassy. “We also have such diversity of sellers in our marketplace, over 2 million sellers in total, with different strategies of whether to pass on higher cost to consumers, the customers are advantaged shopping at Amazon because they’re more likely to find lower prices on the items they care about.”

However, six months later, Jassy’s tone has shifted. Now, he is warning consumers of an unfortunate reality.

Amazon prices will soon rise

In a recent interview with CNBC, Jassy acknowledged that while consumers remain resilient and continue spending, their behavior has changed. Shoppers are actively seeking 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 goods that people will keep buying even if prices rise.

To mitigate the impact of tariffs, Amazon did extensive pre-buying in early 2025, allowing it to hold prices steady longer than many competitors. With its global network of warehouses and distribution centers, the company was able to import and store goods in bulk ahead of anticipated cost increases.

But that extra supply ran out in the fall.

While some of its third-party sellers have chosen to absorb the higher costs to maintain market share, others are passing them on to consumers, resulting in some price hikes.

“So you start to see some of the tariffs creep into some of the prices, some of the items,” he said. “Some sellers are deciding that they’re passing on those higher costs to consumers in the form of higher prices, some are deciding that they’ll absorb it to drive demand and some are doing something in between.”

Jassy blamed U.S. tariffs as a primary driver of the price increases, as these have raised the cost of imported goods.

Tariffs are catching up with Amazon.

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How tariffs are affecting the U.S. economy

Foreign exporters absorb less than 4% of the tariff burden, with the remaining 96% passed through to U.S. buyers, according to research by the Kiel Institute for the World Economy.

“The claim that foreign countries ‘pay’ these tariffs is a myth,” said the Kiel Institute for the World Economy Research Director, Julian Hinz. “The tariffs are, in the most literal sense, an own goal. Americans are footing the bill.”

The current effective tariff rate on all imports stands at approximately 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 imported consumer goods prices rose an average of 5.4%, while domestic goods increased by 3%. Although these numbers are moderate relative to announced tariff rates, their cumulative impact on inflation has been significant.

EconoFact estimates that pass-through tariffs, which are tariff costs shifted from the importer to the consumer, have contributed about 0.7 percentage points to the annual U.S. inflation rate, which stood at 2.7% as of December 2025.

From a macroeconomics perspective, higher prices on goods raise Consumer Price Index (CPI) readings, complicating the Federal Reserve‘s (Fed) ability to ease monetary policy and keeping borrowing costs elevated, further pressuring 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 board member of the Peterson Institute 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 arguably the most likely scenario.”

Amazon remains cautiously optimistic

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 acknowledges the limits of that strategy.

“We’re going to do everything we can to work with our selling partners to make 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, the cost of sales increased by 9.5%, underscoring mounting margin pressures.

Rival retailers are raising prices too

Amazon (AMZN) is not alone in its struggles. Major U.S. retail rivals are also warning customers that higher prices are becoming unavoidable as tariff-related costs accumulate.

Retail giants are raising prices due to tariffs

  • Walmart (WMT): CEO Doug McMillon said the company cannot absorb all tariff-related costs given narrow retail margins during an earnings call in May 2025. (Source: Walmart)
  • Target (TGT): CEO Brian Cornell warned of “massive potential costs” due to tariffs, noting price increases will be a last resort during an earnings call in May 2025. (Source: Target)
  • Best Buy (BBY): CEO Corie Barry confirmed price hikes on select products in May 2025 to offset 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 loom