25 March 2025, Bavaria, Munich: The logo and lettering of global online mail order company Amazon … More can be seen under the blue sky on the façade of Amazon Germany’s headquarters in Parkstadt Schwabing in Munich (Bavaria) on March 25, 2025. Photo: Matthias Balk/dpa (Photo by Matthias Balk/picture alliance via Getty Images)
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President Donald Trump’s recent announcement of sweeping tariffs on goods from over 100 countries has sparked concerns about a potential trade war. This could reignite inflation and weigh heavily on the broader U.S. economy and consumer spending. Amazon (NASDAQ:AMZN), in particular, stands to be significantly affected as its online shopping marketplace is heavily dependent on goods sold by third-party merchants in China who supply a significant portion of the goods sold on Amazon. These tariffs could therefore drive up landed costs for a large proportion of Amazon’s inventory. Consequently, a trade war could also reignite inflation and weigh on the broader U.S. economy and consumer spending. Also, see Buy, Sell, Or Hold AVGO Stock At $170 Amid Trump’s Tariffs?
Amazon’s stock is not immune to economic downturns and it could face substantial losses. Evidence from 2022 shows that Amazon’s stock value decreased by over 50% within a few quarters. This begs the question: If a downturn similar to the one we saw in 2022 were to materialize, could Amazon’s stock, which was around $240 in February, potentially plummet to below $120? Now, of course, individual stocks are more volatile than a portfolio — and in this environment, if you seek upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.
Why Is It Relevant Now?
The concerns raised earlier about the potential impact of tariffs on Amazon are particularly relevant now due to the current economic landscape. While Amazon, like many retailers, has always sourced goods from China and domestic brands with Chinese manufacturing, the present situation presents a larger risk. The recently announced sweeping tariffs, coupled with the increasing possibility of a widespread trade war with key global partners, puts a significant strain on Amazon’s global supply chain. This disruption could lead to higher prices for products across its platform, which, in turn, is likely to dampen overall consumer demand.
The latest tariff announcement, including a substantial 34% levy on Chinese imports — a major global manufacturing hub — further underscores this risk. As these tariffs on Chinese products take effect, the resulting costs will inevitably be absorbed somewhere in the supply chain. This could mean reduced profit margins for Amazon, or ultimately, higher prices passed on to consumers. Furthermore, Trump’s recent aggressive trade policies have reignited fears of a resurgence in inflation, which could further erode consumer spending power and negatively impact retailers like Amazon.
All of this means the U.S. economy could hit a rough spot, and even worse, hit a recession — our analysis here on the macro picture. In fact, Goldman Sachs recently revised its forecast, increasing the likelihood of a U.S. recession to 35%, up from its previous estimate of 20%, the Wall Street Journal reported.
Given the elevated geopolitical uncertainty, partly fueled by potential policy shifts from the new Trump administration, several critical risks warrant attention. The ongoing war in Ukraine continues to contribute to global instability, and the landscape of international trade remains uncertain. Specifically, the implementation of tariffs can lead to increased import costs, which often translate into higher prices for consumers, reduced disposable income, and ultimately, weaker consumer spending. This presents a significant challenge for companies like Amazon, whose business model is heavily reliant on robust consumer discretionary spending.
How Resilient Is AMZN Stock During A Downturn?
AMZN stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on AMZN stock? Our dashboard — How Low Can Amazon.com Stock Go In A Market Crash? — has a detailed analysis of how the stock performed during and after previous market crashes.
Inflation Shock (2022)
- AMZN stock fell 52.0% from a high of $170.40 on Jan. 3, 2022 to $81.82 on Dec. 28, 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock fully recovered to its pre-crisis peak by Feb. 2, 2024.
- Since then, the stock has increased to a high of $242.06 on Feb. 4, 2025 and currently trades at around $195.
Covid Pandemic (2020)
- AMZN stock fell 22.7% from a high of $108.51 on Feb. 19, 2020 to $83.83 on Mar. 12, 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
- The stock fully recovered to its pre-crisis peak by Apr. 14, 2020.
Global Financial Crisis (2008)
- AMZN stock fell 65.3% from a high of $5.04 on Oct. 23, 2007 to $1.75 on Nov. 20, 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500.
- The stock fully recovered to its pre-crisis peak by Oct. 23, 2009.
Preserve And Grow Wealth With Risk-Focused Quality Portfolios
Adding to these concerns, Amazon’s stock currently appears relatively expensive, trading at 3.3 times its trailing revenues. This is slightly higher than the stock’s average price-to-sales (P/S) ratio of 2.7 times over the past three years. Given this valuation and the broader economic uncertainties, ask yourself the questions: Do you want to hold on to your AMZN stock now? Will you panic and sell if it starts dropping to $150, $120, or even lower levels?
Holding on to a falling stock is never easy. Trefis works with Empirical Asset Management — a Boston area wealth manager — whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
AMZN Return Compared With Trefis Reinforced Portfolio
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