Even the cash press, which is Amazon Prime, can’t blunt the blow to profits from President Trump’s new tariffs to Amazon (AMZN).
Amazon could achieve annual operating profits of between $5 billion and $10 billion from higher first-party merchandise costs due to tariffs, Goldman Sachs technology analyst Eric Sheridan warned in a note Friday afternoon.
Sheridan estimated that Amazon’s US product costs would rise by 15% to 20%, assuming there were no mitigation factors such as cost reductions or vendor negotiations.
“We believe Amazon investors are (and will remain) focused on the potential financial impact of mutual tariffs announced by President Trump on April 2,” Sheridan said.
Nearby: April 4th, 4:03pm EDT
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Read more: What Trump’s tariffs mean for the economy and your wallet
President Trump announced a 10% baseline tariff rate, which will take effect on April 5th, in the White House sight, known as Wednesday’s release day.
Higher tariff rates will begin on April 9 in about 60 countries that the administration considers to be the worst trade criminals.
Some of these countries are key sourcing and business areas for large US companies, such as Amazon and its rivals Walmart (WMT) and Target (TGT). For example, in China, we see mutual tariffs of 34%.
Mutual tariffs bring a total tax rate of 54% on goods from the country, in addition to existing obligations, such as the 20% tax that Trump imposed on Chinese products earlier.
China returned to Trump today to announce a 34% tariff on US products.
Amazon’s shares fell nearly 7% in the two days after Trump’s tariff scheme was announced. The stock performance of the “magnificent Seven” members since then is in the middle of the pack. All the spectacular seven components lead to 11% falls in Tesla (TSLA).
Amazon’s stock has now fallen 20% so far.
Sheridan held firmly with a buy rating and a price target of $255. The target price is expected to rise by approximately 43% from the current level.
Veteran Goldman Tech analysts believe Amazon will move to offset tariffs through a series of measures.
“These potential offsets are negotiated with vendors to avoid 100% of input costs being borne by 100%, increasing the price of customers’ specific items, shifting vendor-based and shifting products sold on the platform towards items facing lower tariffs (or domestic US alternatives),” Sheridan explained.
Brian Sozzi is the executive editor of Yahoo Finance. Follow Sozzi on X @Briansozzi, Instagram and LinkedIn. A hint for the story? Please email brian.sozzi@yahoofinance.com.
