Shares of Amazon (NASDAQ: AMZN) ripped higher nearly 8% as of 11:06 a.m. ET today, after officials from the U.S. and China agreed to pause extremely high tariff levels against one another over the weekend. As of this writing, Amazon led stocks in the “Magnificent Seven” on the day, likely due to how intertwined its business with China is.
Business had significant exposure to China
The U.S. and China agreement over the weekend calls for a 90-day pause on elevated tariff rates in which the U.S. had imposed 145% levies on Chinese goods, and China, in retaliation, had imposed 125% tariffs on U.S. goods. During the 90 days, in which officials will try and hammer out a broader trade agreement, tariffs on Chinese goods coming into the U.S. will be about 30%, while tariffs on U.S. goods into China will come down to 10%.
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It’s big for Amazon, which gets an estimated 30% of its gross merchandise value, or the value of products sold on its website, from China, according to analysts from Raymond James. Roughly 14% of advertising spend in 2024 also came from advertisers in China, which is more than others in the Magnificent Seven.
In a research note in late April, Raymond James thought most investors were underestimating the impact of tariffs and the macroeconomic environment on Amazon’s earnings, so the news could lead to higher earnings estimates in the future.
Image source: Getty Images.
Continue to monitor trade negotiations
While the announcement over the weekend is a huge first step, it still remains to be seen how things will shake out once an ultimate trade deal is reached. That said, Amazon had been well positioned prior to the tariff saga, with leadership in the e-commerce, cloud, and artificial intelligence (AI) sectors. With the worst of the U.S.-China trade war likely in the rearview, the stock should see clearer skies ahead.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
