Introduction
U.S. tariffs on Chinese imports were enacted to protect American businesses and spur local production. The outcome, though, has been far from flawless for numerous U.S. vendors—particularly those with wholesale structures on big platforms like Amazon and Walmart.
Amazon CEO Andy Jassy recently voiced concern that these tariffs are actually having the opposite effect, unintentionally giving Chinese sellers a competitive edge. This article explores how the current tariff regime disadvantages U.S. wholesale sellers, why Chinese sellers are winning, and what American businesses can do to stay competitive in this rapidly changing landscape.
What Are Tariffs and Why Were They Imposed?
Tariffs are levies on foreign products. The United States recently put a series of tariffs on Chinese imports as part of a larger trade policy effort. The goal was to shield American manufacturing, cut Chinese dependencies, and level trade.
Ideologically, they were designed to serve American business by driving up the cost of imports so companies and consumers will instead consume American-made goods. Within the model of the new web-based global economy—where goods will often come from around the world—the task is otherwise.
The Hidden Impact on U.S. Wholesale Sellers
One of the least examined elements of the tariff policy is the calculation of the tariff. American wholesale retailers frequently obtain their goods through domestic wholesalers who already have imported the products from China. These wholesalers buy products at prices marked up and subsequently pay tariffs on that higher price.
For instance, when a U.S. retailer purchases an item worth $20 from a distributor who initially brought it from China at $10, the tariff is levied on the $20 value. Suppose the rate of tariff is 25%. Then the tariff equals $5.
By comparison, a retailer who imports the same item directly from a Chinese factory pays just 25% of the $10 factory price—only $2.50 in duties. This creates a profound cost difference between wholesale and direct import models, rendering U.S.-based wholesale sellers much less competitive.
Chinese Sellers Are Winning the Price War
The price differential produced by this tariff policy enables Chinese vendors—or U.S. vendors who import directly from Chinese factories—to set their products at a lower price while still enjoying good profit margins. This has driven a seismic change in the vendor landscape.
As of 2025, more than 50% of new Amazon and Walmart sellers are either Chinese-based or directly importing from Chinese factories. Chinese sellers are predominant in best-selling listings in categories such as electronics, kitchenware, and home products. With their capability to provide competitive prices, as well as lower tariff rates, they have a significant edge over local sellers.
These vendors also take advantage of sophisticated logistics offerings like Amazon Global Logistics and other third-party options, enabling them to deliver items effectively to American consumers at lower expenses.
Why U.S. Wholesale Sellers Are Struggling
The primary reason U.S. wholesale sellers are at a disadvantage is the accumulation of costs at every step in their supply chain. They pay more for the product upfront, absorb higher tariffs due to inflated prices, and still have to compete in a marketplace where price is often the determining factor for sales.
Moreover, these sellers operate with thin profit margins. The additional burden of tariffs erodes their already limited profits, making it increasingly difficult to remain competitive. And with pricing pressure from overseas sellers, U.S. wholesalers often cannot increase their retail prices without risking a drop in visibility or loss of the Amazon Buy Box.
On top of that, many wholesale sellers face inflexible pricing structures. They are locked into distributor contracts or minimum order quantities that limit their ability to adapt quickly to changing market conditions.
Case Study: How Tariffs Affect Real-World Sellers
Consider the case of an American electronics distributor selling USB-C charging stations. They purchase them from a domestic distributor for $25 per unit. Adding a 25% tariff, they pay $6.25 more per unit. They sell on Amazon for $34.99, with a small profit margin of approximately 3-5%.
While doing so, a Chinese competitor imports the same product at a factory price of $10, pays a $2.50 tariff, and retails it on Amazon for $29.99. That merchant has a far greater profit margin—typically 20-25%—yet still undercuts the U.S. merchant’s price.
The U.S. merchant loses the price war and visibility while offering an identical product, and the overseas merchant expands their share of the marketplace.
What Amazon’s CEO Andy Jassy Thinks
Amazon Chief Executive Andy Jassy has officially admitted the problem. In an interview recently, he said that he was worried the tariff regime was causing more damage than benefit to American businesses. The system is defective because it punishes U.S. sellers who do not import directly from China, making them pay higher tariffs based on inflated wholesale prices, said Jassy.
He pointed out that the unforeseen effect of these tariffs is the growing dominance of Chinese vendors on platforms such as Amazon and Walmart. Jassy’s comments imply that if the aim is actually to assist American small businesses, then the tariff structure must be revised critically at once.
Strategies for U.S. Sellers to Compete and Survive
While the environment today is tough, there are workable strategies that U.S. sellers, particularly those in wholesale, can embrace to stay in the game.
Reexamine Sourcing Models
The best thing that step sellers can do is to think about buying goods directly from China-based manufacturers or other low-cost areas. Removing middlemen minimizes the total cost of merchandise and the basis on which tariffs are levied. Platforms such as Alibaba, 1688.com, and reputable sourcing agents can assist in opening direct relations with factories.
Shift to Private Label
Instead of selling existing branded goods, sellers can venture into private labeling. This entails importing generic goods and selling them under a proprietary label. Private label sellers have more control over customer experience, branding, and pricing. They are also able to charge higher margins and establish long-term customer relationships.
Negotiate Better Terms with Distributors
If short-term direct sourcing is not feasible, U.S. suppliers must attempt to renegotiate with their current distributors. This may involve requesting tariff-sharing arrangements, better bulk prices, or longer payment terms to relieve cash flow tension.
Take Advantage of Amazon’s Branding Tools
Vendors can register their brands using Amazon Brand Registry and utilize advanced marketing features such as A+ Content, Brand Stores, and Amazon Posts. These tools assist in building a more professional and interactive shopping experience, which can counteract price disparities by adding perceived value.
Expand to Multiple Sales Channels
Reliance on Amazon only makes one more exposed to competition. Expansion to marketplaces like Walmart Marketplace, eBay, TikTok Shop, or a DTC Shopify store can help diversify and diffuse risk as well as access new consumers. Email marketing, paid advertising, and social commerce must also be a consideration for sellers to build a more resilient brand presence.
Should the Government Rethink Tariffs?
Most industry insiders contend that the existing tariff model does not factor in the nature of how today’s e-commerce operates. Tariffs charged based on wholesale prices punish U.S. vendors, while those selling directly from overseas have a cost benefit.
The policymakers could potentially introduce exemptions for small- and medium-sized U.S. firms, provide incentives for domestic sources, or redesign the method through which tariffs are levied so that they represent manufacturing costs instead of wholesale values.
Until these changes are made, the onus falls on U.S. sellers to adjust and seek means of being competitive under the current system.
Conclusion
What was intended as a protectionist measure has, ironically, turned out to be a growth driver for foreign sellers. The existing tariff regime places U.S. wholesale sellers at a disadvantage—especially those not directly importing from producers.
The truth is evident: Chinese and direct-import vendors are taking over large marketplaces such as Amazon and Walmart because they have lower product prices and smaller tariff loads. As this continues, U.S. wholesale vendors need to adapt.
Whether by direct sourcing, private label purchasing, or expanding sales channels, US sellers must reclaim control over supply chains and reconsider the way they are operated. With the proper approach, it is still manageable to compete—and even prosper—in the global e-commerce market.
