Analysis
Amazon's direct exposure to the U.S. tariffs introduced around April 2025 under the International Emergency Economic Powers Act (IEEPA) and reciprocal trade actions was structurally limited compared to conventional brick-and-mortar retailers. The company's third-party seller marketplace accounts for over 60% of worldwide paid units sold, and independent suppliers and merchants typically act as the importer of record, handling customs entry and paying relevant import duties directly1. On its first-party retail business where Amazon imported merchandise directly, management mitigated immediate tariff shocks by forward-buying and pre-positioning inventory in the United States ahead of implementation, while leveraging multi-year supply chain diversification efforts1,2.
In the first quarter of 2025, Amazon recorded one-time operational charges that reduced segment operating margins by approximately 90 basis points in North America and 70 basis points in International2. Applying these margin impacts to segment net sales of $92,887M in North America and $33,513M in International implies headwinds of approximately $836M and $235M, respectively, or roughly $1.07B in aggregate2,3. Management attributed these charges jointly to unresolved historical customer returns and receiving costs for inventory pulled forward into the quarter ahead of anticipated tariffs2. Although Amazon paid tariffs on first-party retail purchases through 2025, management noted the financial effect remained small because of prior pre-buying2. Across full-year 2025, Amazon did not break out standalone tariff expenses, stating in its annual report that macroeconomic factors, including unpredictable shifts in global tariff and trade policies, had direct and indirect operational impacts that were difficult to predict, isolate, and quantify4.
Throughout 2025, Amazon prioritized sharp pricing and market share over passing tariff costs downstream to consumers. Chief Executive Officer Andy Jassy reported that retail demand showed no attenuation and average selling prices did not appreciably rise across the stores business2,5. In instances where Amazon incurred higher input costs due to tariffs on its first-party retail inventory, it largely absorbed those costs rather than passing them on to shoppers1. Across the third-party marketplace, seller strategies diverged, with extensive merchant diversity and price competition preventing platform-wide inflationary spikes5.
The legal framework shifted in February 2026 when the U.S. Supreme Court struck down the tariffs imposed under IEEPA in Learning Resources, Inc. v. Trump CNBC. In the second quarter of 2026, Amazon received approximately $640M in tariff refunds under IEEPA ($600M cited on the earnings call), recorded primarily as a reduction to Cost of sales within the North America segment1,6. Management confirmed this recovery represented the significant majority of all refunds it expected to receive1,6. Chief Financial Officer Brian Olsavsky explained that the refund total was limited because Amazon had minimized tariff exposure through inventory pre-positioning and because Amazon was not the importer of record for most goods sold1. Amazon noted that in the limited circumstances where specific import charges had been passed on to consumers, it would proactively and automatically issue customer refunds, while reinvesting the remainder into everyday low retail prices1.
Because tariff refunds represent a one-time cash recovery rather than an ongoing improvement in business fundamentals, underlying operational profitability in the second quarter of 2026 was lower than reported. For the second quarter of 2026, North America segment operating income was reported at $9,123M (7.9% operating margin); excluding the $640M refund, underlying segment operating income was $8,483M (7.3% operating margin), representing a 55 basis point margin benefit from the refund6,7. On a consolidated basis, worldwide operating income was reported at $27,461M (13.7% operating margin); excluding the refund, underlying operating income was $26,821M (13.4% operating margin), a 32 basis point benefit6,7. As of October 30, 2026, following the release of third-quarter 2026 results, Amazon faces no ongoing forward-looking tariff headwinds, expects no further material tariff recoveries, and provided no forward-looking tariff cost guidance for the fourth quarter of 2026 or fiscal 20277,8.
Data
| 1Q25 | 2Q25 | 3Q25 | 4Q25 | 1Q26 | 2Q26 (Rep.) | 2Q26 (Ex-Refund) | 3Q26 | |
|---|---|---|---|---|---|---|---|---|
| North America Segment | ||||||||
| Net Sales | $92,887M | $100,068M | $106,267M | $127,083M | $104,143M | $116,177M | $116,177M | $112,852M |
| Operating Income | $5,841M | $7,517M | $4,789M | $11,472M | $8,267M | $9,123M | $8,483M | $8,723M |
| Operating Margin | 6.3% | 7.5% | 4.5% | 9.0% | 7.9% | 7.9% | 7.3% | 7.7% |
| Tariff Refund Benefit | -- | -- | -- | -- | -- | $640M | -- | -- |
| Consolidated Worldwide | ||||||||
| Net Sales | $155,667M | $167,702M | $180,169M | $213,386M | $181,519M | $200,606M | $200,606M | $201,944M |
| Operating Income | $18,405M | $19,171M | $17,422M | $24,977M | $23,852M | $27,461M | $26,821M | $28,076M |
| Operating Margin | 11.8% | 11.4% | 9.7% | 11.7% | 13.1% | 13.7% | 13.4% | 13.9% |
| Tariff Refund Benefit | -- | -- | -- | -- | -- | $640M | -- | -- |
Disclosed Tariff Figures
| Period | Measure | Basis | Status | Amount | Stated | Source |
|---|---|---|---|---|---|---|
| 1Q-2025 | North America operating margin headwind from unresolved customer returns and tariff pull-forward receiving costs | Gross | Actual | 90 bps | 2025-05-01 | 2 |
| 1Q-2025 | International operating margin headwind from unresolved customer returns and tariff pull-forward receiving costs | Gross | Actual | 70 bps | 2025-05-01 | 2 |
| 2Q-2026 | Tariff refunds received under IEEPA (reduction to Cost of sales, North America) | Refund | Actual | $640M | 2026-07-30 | 6 |
| 2Q-2026 | Tariff-related refunds received (North America) | Refund | Actual | $600M | 2026-07-30 | 1 |
Net Impact Estimates
- Cost Impact (Historic): $600M–$640M
Sources
Before moving on to guidance, I'll briefly touch on the impact from the tariff-related refunds on our results. We are participating in the tariff refund process, as I mentioned earlier, we received approximately $600mn in Q2. The amount is limited for a couple of reasons. First, our teams did a lot of work forward buying and pre-positioning inventory to avoid tariff costs. Second, we are not the importer of record for the large majority of items sold in our store, given suppliers typically handle imports and pay relevant tariffs. In cases where we did see an increase in cost due to tariffs, we largely absorbed these costs rather than pass them on to customers.
As I mentioned earlier, during the quarter, we recorded one-time charges related to some historical customer returns that have not yet been resolved, and some costs to receive inventory that was pulled forward into Q1 ahead of anticipated tariffs. Without these charges, North America and international operating margins would have been approximately 90 basis points and 70 basis points higher, or operating margins of 7.2% for North America and 3.7% for international.
There continues to be a lot of noise about the impact that tariffs will have on retail prices and consumption. Much of it thus far has been wrong and misreported. As we said before, it's impossible to know what will happen. Where will tariffs finally settle, especially China? What happens when we deplete the inventory we forward bought or that our selling partners forward deployed in advance of the tariffs going into effect? If costs end up being higher, who will absorb them? What we can share is what we've seen thus far, which is that through the first half of the year, we haven't yet seen diminished demand, and we haven't seen any kind of broad-scale ASP increases.