Bank of America breaks down exactly how much Amazon and Wayfair will have to hike prices to offset US tariffs on Chinese imports
- The latest development in the global trade war featured the US putting into effect a 15% tariff on an additional $112 billion of Chinese goods on September 1.
- Many US companies source finished goods and materials from China, and the most recent round of tariffs is expected to affect online and physical retailers.
- Analysts from Bank of America ran the numbers and came up with exact estimates for how much Amazon and Wayfair will have to raise prices to offset the additional duties.
- Visit the Markets Insider homepage for more stories.
The US-China trade war has intensified in recent weeks as both countries have instated fresh tariffs on hundreds of billions of dollars worth of goods.
The US imposed a 15% tariff on $112 billion worth Chinese products ranging from electronics to furniture. Bank of America predicts that Amazon would have to increase US prices between 2.1% and 2.6% to offset the cost of the new tariff, while Wayfair would need to raise prices by 4.6%.
"Most internet stocks have macroeconomic exposure, but e-commerce has the most tariff risk due to the impact on product pricing," Justin Post, an analyst at Bank of America, said in a note to clients on Wednesday.
Amazon sells products from both third party vendors and its own private label brands. According to BAML, about 20% of Amazon's private-label cost of goods sold - which takes into account the direct costs of a selling a specific product - is attributable to Chinese imports. The figure for third-party vendors is slightly higher, coming in around 25%.
Wayfair operates a similar type of marketplace that aggregates thousands of furniture and home goods suppliers. The retailer has more than double Amazon's exposure to Chinese market, according to BAML. The firm estimates Chinese imports could account for as much as 60% of the cost of goods sold for some home good and furniture product lines.
Post expects Amazon and Wayfair to start sourcing more materials from outside China to buffer the impact of the tariffs.
"We expect substitution in the marketplace to reduce the impact, both from consumers buying from non-China sourced sellers, and sellers sourcing from other markets," Post said in the report.
Shares of Amazon are up 19.9.% year-to-date, while Wayfair's stock price has increased 32.2%.
