How U.S. Tariffs Are Changing Your Bill at Amazon, Walmart, and Temu

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Trade wars sound like abstract policy debates happening in Washington boardrooms.

But walk into any American home and you’ll find the real battleground: your shopping cart.

Whether you’re buying toys on Amazon, groceries at Walmart, or gadgets on Temu, import taxes are quietly reshaping what you pay for everyday goods.

What Are Tariffs?

Think of a tariff as a cover charge for foreign goods entering America. When a product crosses the border, the U.S. government charges a tax before it can be sold here. Most tariffs work like sales tax—they’re calculated as a percentage of the item’s total value, including shipping costs. This is called an ad valorem tariff.

Sometimes the government charges a flat fee instead. A “specific tariff” might add $2 to every imported shirt, regardless of whether it’s a $10 basic tee or a $50 designer piece.

When goods arrive at one of America’s 328 ports of entry, the American company importing them pays the tariff directly to U.S. Customs and Border Protection. All that money goes straight into the U.S. Treasury.

Who Sets the Rules?

The Constitution gives Congress the power to regulate trade and collect duties. But over the past century, lawmakers have increasingly handed this authority to the President. The idea was to keep trade policy away from local political pressures and let the executive branch negotiate deals more quickly.

Several key laws give the President broad tariff powers:

Section 232 of the Trade Expansion Act lets the President impose tariffs on imports that threaten national security. This authority was used for broad tariffs on steel and aluminum.

Section 301 of the Trade Act allows the U.S. Trade Representative to investigate and retaliate against unfair foreign trade practices. This was the main tool used against China starting in 2018, citing issues like intellectual property theft.

The International Emergency Economic Powers Act gives the President sweeping powers to regulate international commerce during any “unusual or extraordinary” threat. This law became the foundation for the broad “reciprocal tariffs” announced in 2025, justified by declaring persistent trade imbalances an economic emergency.

This shift has concentrated enormous power in the executive branch. While Congress originally delegated authority to streamline lowering trade barriers, recent administrations have used these same laws to rapidly increase tariffs for strategic and political goals.

The result? A highly unpredictable environment where tariff policy can be announced on social media and implemented within weeks. This represents a stark departure from the stable, rules-based global trading system that emerged after World War II.

Why Governments Use Tariffs

Tariffs were once America’s primary source of revenue. The introduction of federal income tax in 1913 changed that permanently. Today, tariffs account for less than 2% of federal revenue. Instead, they serve as strategic tools for three main purposes:

Protecting Domestic Industries: Making foreign goods more expensive encourages consumers to buy American-made alternatives. This protects industries considered vital to national security or politically sensitive sectors like agriculture and manufacturing.

Retaliating Against Unfair Practices: Tariffs punish foreign governments for actions seen as unfair, such as subsidizing their own exporters or forcing American companies to transfer technology.

Foreign Policy Leverage: Modern tariffs pressure other countries on everything from reducing trade deficits to cooperating on drug trafficking. The 2025 reciprocal tariffs were explicitly designed to force trading partners to negotiate new bilateral agreements more favorable to the U.S.

The 2025 Tariff Revolution

The year 2025 marked a dramatic escalation in U.S. trade policy. The announcement of broad “reciprocal” tariffs on imports from nearly every American trading partner represented a fundamental shift from targeted, product-specific tariffs to sweeping, country-wide import taxes.

Using the International Emergency Economic Powers Act, the new policy established a baseline 10% tariff on almost all imports. On top of that, it added higher, country-specific tariffs calculated based on each nation’s trade surplus with the U.S., with rates ranging from 11% to over 50%.

Although the administration announced a 90-day pause on many country-specific rates to allow for negotiations, the move represented a fundamental departure from the post-World War II trading system.

China in the Crosshairs

The trade conflict with China, which began in 2018, reached a boiling point in 2025 with rapid tariff escalations. The actions created a “tariff stack,” where multiple layers of taxes hit the same imported goods.

In February and March, the administration imposed two successive 10% tariffs on all Chinese goods. In April, a 34% “reciprocal tariff” was added, justified by the large U.S. trade deficit with China.

This triggered a tit-for-tat escalation. When China retaliated with its own 34% tariff, the U.S. raised its rate to 84%. China matched it, and the U.S. then raised its rate to 125%, which China again matched.

By mid-May 2025, following a temporary agreement to reduce the reciprocal tariffs to 10% during negotiations, the average U.S. tariff on Chinese goods stood at 51.1%—a dramatic increase from the 2.7% average rate in 2017.

The Death of the $800 Loophole

Perhaps the most impactful change for online shoppers was the closure of a customs rule called “de minimis.” This obscure provision had become the foundation of ultra-low-cost e-commerce.

Section 321 of the Tariff Act of 1930 allows shipments valued below $800 to enter the U.S. completely free of duties and with minimal customs paperwork. Since 2016, that threshold has been $800.

This rule became the backbone of platforms like Temu and Shein. These companies built their empires by shipping millions of small packages directly from Chinese manufacturers to U.S. consumers, with each package valued under $800 and thus bypassing all U.S. tariffs.

An executive order issued in February 2025 suspended this de minimis exemption for all goods from China and Hong Kong, taking full effect on May 2, 2025. Suddenly, every single package from China, regardless of value, became subject to the full stack of applicable tariffs.

The change is becoming permanent and global. A new law signed in July 2025 will eliminate the de minimis exemption for all commercial shipments from all countries, effective July 1, 2027. This marks a fundamental reversal in how the U.S. treats low-value e-commerce imports.

The elimination functions as industrial policy. While officially justified by the need to stop illicit goods and level the playing field for domestic retailers, the policy’s most direct effect is crippling the competitive advantage of foreign e-commerce models. By revoking the exemption, the policy forces companies like Temu to abandon their direct-ship model and adopt much higher-cost structures involving bulk importation and U.S. warehousing.

Who Really Pays the Bill?

Despite political rhetoric suggesting that foreign countries pay tariffs, the financial reality is that the tax is paid by the U.S.-based company importing the goods. When a shipment arrives at a U.S. port, the American business designated as the “importer of record” is legally responsible for paying the corresponding duty to CBP. This is a direct, upfront cash cost for American businesses.

From Business Cost to Your Shopping Cart

Once the U.S. importer has paid the tariff, they face a new cost that must be accounted for. Multiple economic analyses of recent tariff actions have concluded that these costs are passed on almost completely to American firms and consumers. Foreign exporters have generally not lowered their prices to absorb the cost of U.S. tariffs.

Faced with this expense, a U.S. business has two main options:

Absorb the cost: The company can pay the tariff out of its own profits, accepting a lower profit margin. For many businesses, especially small and medium-sized enterprises or those in highly competitive sectors, this isn’t sustainable.

Pass the cost to consumers: The more common choice is raising the final retail price to cover the tariff cost. This is why economists say consumers ultimately foot the bill.

A Federal Reserve Bank of New York survey found that approximately 75% of manufacturers and 77% of service firms who faced higher costs due to tariffs had passed at least some of that cost to customers, with many passing on the entire amount.

The Small Business Squeeze

For thousands of small and medium-sized businesses selling goods online, the choice between absorbing costs and raising prices is often devastating. Squeezing already-thin profit margins can threaten business survival, while raising prices in competitive online marketplaces can collapse sales.

The sudden imposition of tariffs creates immense uncertainty and disrupts financial planning. Businesses report facing severe cash crunches from having to pay unexpected, large tariff bills for inventory already ordered and in transit, forcing them to scramble for capital or abandon shipments entirely.

Tariffs function as a regressive consumption tax. Unlike state sales tax, which appears as a separate line item on receipts, tariffs are embedded within product prices. This lack of transparency means consumers experience the impact as generalized inflation—a feeling that “prices are just going up”—rather than as the direct result of government policy.

Because the cost affects both discretionary items and basic necessities like food, clothing, and children’s car seats, and because lower-income households spend a larger proportion of their income on consumer goods, broad-based price increases disproportionately affect their purchasing power.

How Amazon Handles the Heat

Amazon’s complex business structure creates a multi-layered response to tariffs. To understand the impact, you need to distinguish between two ways products are sold on Amazon:

First-Party (1P): Products listed as “Ships from and sold by Amazon.com.” Here, Amazon acts as a traditional retailer, buying products wholesale, importing them, and holding inventory. For these goods, Amazon is the importer of record and pays applicable tariffs directly.

Third-Party (3P): Products listed as “Sold by and Fulfilled by Amazon” or “Ships from and sold by.” Independent businesses use Amazon’s platform as a marketplace. These sellers source their own products and pay their own tariffs if they import.

Third-party sellers now account for over 60% of all physical products sold in Amazon’s store. This means for most items on the platform, the direct financial burden of tariffs falls not on the trillion-dollar corporation, but on hundreds of thousands of smaller, independent businesses.

The Third-Party Seller Crisis

A significant percentage of Amazon’s third-party sellers are either based in China or are American businesses that rely almost exclusively on Chinese manufacturing. These sellers are on the front lines of the trade war. A sudden tariff of 25%, 50%, or more can instantly erase their entire profit margin.

Amazon’s CEO Andy Jassy has acknowledged that sellers’ profit margins are generally not large enough to absorb these additional costs, meaning they’ll likely have to be passed on to buyers. This has created a crisis for these businesses, forcing them to raise prices and risk losing customers, or absorb losses that could threaten their viability.

Seller Survival Strategies

Amazon sellers are scrambling to adapt. Many tried to stockpile inventory in U.S. warehouses before the 2025 tariffs took full effect, creating a temporary buffer. However, analysts expect that inventory to be sold down by the third or fourth quarter, when the full impact will be felt.

Longer-term strategies include:

Sourcing Diversification: Exploring manufacturing in Vietnam, India, or Mexico to move supply chains out of China, though this is complex, slow, and expensive.

Pricing and Bundling: Repackaging high-tariff items into bundles with lower-tariff accessories to create products with blended margins that can better absorb costs.

Tariff Code Auditing: Hiring experts to audit product classifications under the Harmonized Tariff Schedule, as different classification codes can result in significantly lower duty rates.

Amazon’s marketplace model effectively insulates the corporation from the most direct financial and political consequences of tariffs. While traditional retailers must pay tariffs and make sensitive pricing decisions, on Amazon, independent third-party sellers pay the tax and make pricing decisions. For consumers, price increases appear to originate from individual sellers, not from Amazon itself.

Walmart’s Fortress Strategy

Walmart has pursued a distinct strategy to weather the tariff storm, building what amounts to a defensive fortress against import taxes.

America’s Sourcing Commitment

For over a decade, Walmart has been engaged in a strategic initiative to increase its U.S. sourcing. In fiscal year 2023, approximately two-thirds of products sold in Walmart’s U.S. stores were made, grown, or assembled domestically. The company has a stated goal to purchase an additional $350 billion in U.S.-made products by the end of 2031.

This heavy reliance on domestic supply provides a significant shield against import tariffs, especially compared to retailers more dependent on imported goods. Walmart is also actively diversifying its international sourcing, with a major initiative to triple its sourcing from India to $10 billion annually by 2027.

This strategy reveals a fundamental evolution in corporate thinking, moving from supply chains optimized purely for lowest cost to ones that prioritize resilience and risk diversification. The tariff volatility of recent years has exposed the danger of over-relying on one manufacturing country.

Executive Honesty About Price Increases

Despite its domestic focus, Walmart remains one of the world’s largest importers, with China and Mexico as its most significant foreign suppliers. The company’s leadership has been candid about the limits of their strategy.

CEO Doug McMillion stated plainly to investors, “Higher tariffs will result in higher prices.” Similarly, CFO John David Rainey warned that dramatically higher tariff levels “could be significant and even jeopardize our ability to grow earnings year-over-year.”

The company even retracted its first-quarter income guidance in 2025, citing tariff uncertainty.

Protecting “Everyday Low Prices”

Walmart’s entire brand is built on “Everyday Low Prices,” creating immense internal pressure to absorb costs rather than pass them to consumers. To manage this, the company is engaged in a careful balancing act:

Supplier Negotiations: Using enormous purchasing power to pressure suppliers to lower prices and help offset tariff costs.

Prioritizing Groceries: Focusing efforts on keeping food prices low, as this category drives traffic and where consumers are most price-sensitive.

Private-Label Brands: Emphasizing store brands like Great Value and Equate. Private labels give Walmart greater control over supply chains and costs, and these products are more likely to be sourced domestically.

Strategic Price Hikes: Being selective about where prices rise, likely focusing on general merchandise like electronics, toys, and home goods, where the company is more exposed to Chinese imports.

Temu’s Existential Crisis

For Temu, the 2025 tariff changes weren’t just a challenge to manage—they were an existential threat to the company’s core business model.

Built on a Loophole

Temu’s entire value proposition of shockingly low prices is built on connecting U.S. consumers directly with Chinese manufacturers. This model was economically viable almost exclusively because of the Section 321 “de minimis” rule.

By shipping millions of individual packages valued under $800, Temu legally bypassed all U.S. import duties, giving it a massive cost advantage over any retailer that had to pay tariffs. The elimination of the de minimis exemption for China in May 2025 removed the foundational pillar of Temu’s low-cost structure.

The Forced Pivot

Faced with this threat, Temu was forced into a radical and expensive operational pivot. In May 2025, the company reportedly halted all direct shipments from China to U.S. customers. It’s now shifting to what it calls a “half-custody” model.

Under this new system, Chinese merchant partners must first ship goods in bulk to warehouses in the United States. These bulk shipments are large and valuable, so they’re subject to full import tariffs. Only after goods are stateside and duties are paid can they be sold and fulfilled to U.S. customers from local warehouses.

This fundamentally transforms Temu from an asset-light, direct-ship marketplace into a business reliant on traditional, far more costly import-and-warehouse logistics.

The Price Shock

The consequences of this forced pivot are now appearing on Temu’s app. The company must now account for the full cost of tariffs in its pricing. Reports show Temu has begun adding explicit “import charges” at checkout, with some items more than doubling in price. In one documented example, a power strip priced at $19.49 had an additional import charge of $27.56 added at checkout.

This completely erodes Temu’s primary appeal. The company has already slashed its massive U.S. advertising budget, and data from May 2025 showed a staggering 58% drop in its daily active users in the U.S. following the tariff changes.

Temu’s parent company, PDD Holdings, acknowledged the “significant pressure” tariffs have created and reported declining profits. This demonstrates how trade policy can be wielded as a competitive weapon, altering market dynamics more swiftly than traditional regulatory actions.

By removing the specific customs rule that enabled Temu’s disruptive model, U.S. policy forced the company to compete on the same terms as established rivals, instantly neutralizing its core structural advantage.

What This Means for Your Shopping

The corporate strategies and government policies are complex, but the end result for American consumers is largely consistent across all platforms: the era of predictable, ever-decreasing prices for many imported goods appears to be over.

You can expect higher prices, particularly on goods categories heavily reliant on Chinese manufacturing—electronics, toys, and apparel. A toy that cost $15 on Amazon before could see its landed cost for the seller jump from $7.50 to $12 after tariffs, forcing a retail price increase to $15.99 or higher just to maintain profit.

Experts warned that a 20% tariff on toys could make them significantly more expensive, and retailers’ current inventory, purchased at pre-tariff prices, provides only a temporary shield.

Walmart executives have pointed to specific price hikes, such as a Chinese-made car seat potentially increasing by $100 from its $350 price point. Even with heavy domestic sourcing, Walmart and other retailers selling electronics are highly exposed, as China dominates that supply chain.

Consumer behavior is already adapting. Surveys show that many shoppers are consciously changing their habits, with some delaying purchases hoping for more certainty and others buying earlier to lock in pre-tariff prices.

The cost of a tariff, first paid by an American importer at the port, makes its way through a complex global supply chain until it lands, embedded and often unseen, in the final price of goods in your online shopping cart. Trade policy has become consumer policy, and every click of “buy now” reflects the new reality of America’s approach to global commerce.

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