Tariff fears around Amazon "more bark than bite," experts tell Jefferies

Investing.com - Worries over the impact of sweeping U.S. tariffs on Amazon (NASDAQ:AMZN) appear to be "overstated for now," as the e-commerce giant remains a "go-to destination" for online spending, according to analysts at Jefferies.

Economists have flagged that the Trump administration’s aggressive trade agenda, which has included threats of elevated levies on a host of countries, could drive up inflation and weigh on economic activity.

Concerns have also swirled around the impact of this uncertainty on consumer activity, with some observers anticipating that shoppers could react to this murky backdrop by reining in nonessential purchases.

Yet, despite these fears, prices increases at Amazon have been more muted than anticipated, while second-quarter sales were "solid" as consumer expenditures stayed "resilient," the Jefferies analysts said in a note, citing two e-commerce experts.

Amazon’s prolonged annual Prime Day sales event, which took place earlier this month, was also a success, featuring growth in the mid- to high-single digit to low double-digits, the brokerage said.

Meanwhile, Amazon has become increasingly seen as a "core distribution channel by both brands and sellers, prompting greater investment in advertising and the tools and workflows needed to scale effectively on the platform," the analysts added.

They noted that Amazon’s marketplace is "increasingly dominated" by large retailers and sellers from China, while smaller brands "face mounting structural and financial pressures" from the company’s "evolving fee structure." In an effort to control costs, many of these smaller retailers have been embracing generative artificial intelligence to reduce content creation costs and accelerate marketing efficiency, the analysts said.

"As tools mature overtime, our experts expect AI adoption to expand across the seller base, which could improve seller economics and increase ad spend on the platform, benefiting Amazon’s ad business in the long-term," the strategists wrote.

The comments come as Amazon is due to report its latest quarterly earnings after the close of U.S. markets on Thursday.