The imposition of tariffs on imported goods threaten to significantly impact the ecommerce landscape here in the United States. This is done by increasing the cost of products sourced from international markets. Many ecommerce businesses, particularly small and medium-sized ones, rely on cost-effective supply chains from countries like China, where tariffs are being greatly applied. These tariffs, such as the proposed 10-20% on all imports and up to 60% on Chinese goods announced in early 2025, raise the price of new and incoming inventory, forcing businesses to either absorb the costs or – more than likely -pass the cost increase on to consumers. We will initially see disruptions within the competitive pricing model that ecommerce thrives on, reducing profit margins or driving customers to seek cheaper alternatives. In many instances, alternatives do not currently exist since similar items are not produced in the US.
Beyond pricing, tariffs alter consumer behavior and market dynamics in ecommerce. Higher prices due to tariffs can decrease demand for imported goods, pushing consumers toward domestic products or prompting them to reduce online spending altogether. Data from past tariff implementations, like the 2018-2019 trade war, showed a 0.4% drop in US retail sales for affected categories. Additionally, marketplaces like Amazon and Walmart, which host numerous third-party sellers, may see shifts in product offerings as sellers. Many resellers, wary of incoming tariff increases, chose to stock up on inventory, or pivot to locally sourced goods. However, this transition is costly and time-consuming, particularly for businesses lacking the resources and funding to quickly reconfigure supply chains or lacking the capacity to warehouse additional products. These factors may be leading to potential market consolidation favoring larger players.
Another option for ecommerce sellers and businesses is to build their own digital storefront, eliminating commission fees to larger, more well known marketplaces. This comes with its own pros and cons, as marketing costs to promote one’s own storefront can match or exceed commission and customer greatly rely on and trust sites such as Amazon, for finding a vast variety of goods and to keep their financial and order history secure.
While tariffs aim to bolster domestic manufacturing, their short-term effect on ecommerce is likely to be higher prices, reduced consumer choice, and increased operational strain, reshaping the competitive landscape. The future of ecommerce is uncertain, but like with any challenge facing the American people, innovation and determination will win out in the long run.
