Amazon is taking a hard line with its wholesale suppliers, refusing to absorb rising tariff and oil costs. This signals a strategic shift away from its historical focus on vast product selection, even at a loss, towards prioritizing profitable items, which could squeeze smaller brands and ultimately reduce its product variety.

Instead of immediately passing tariff costs to consumers, US corporations are initially absorbing the shock. They are mitigating the impact by reducing labor costs and accepting lower profitability, which explains the lag between tariff implementation and broad consumer inflation.

Despite new tariffs on vehicles and parts, consumer prices have remained stable. Manufacturers are passing costs to dealers via higher invoice prices, and dealers are accepting lower profit margins rather than raising sticker prices for customers.

Economic analysis debunks the political claim that foreign nations pay for tariffs. In reality, there is a near-complete cost pass-through to American buyers. U.S. consumers ultimately shoulder 96% of the tariff burden through higher prices, while foreign firms absorb only a negligible 4%.

Post-pandemic, companies have shifted from setting prices on a fixed schedule to "state-dependent pricing." They now adjust prices more frequently in direct response to rising costs, causing inflation to pass through to consumers more quickly and persistently.

Unlike in 2021-2022, companies are now more reluctant to raise prices. Key factors include consumer resistance after high inflation, anchored inflation expectations, political scrutiny, and significant uncertainty over tariff policies, which makes firms fear losing market share if they act prematurely.

Kai Ryssdal explains that the current rise in consumer prices is a lagging effect of tariffs. For months, businesses absorbed these costs to protect market share. Now, with squeezed margins, they are forced to pass the costs on to consumers, resulting in a delayed but significant inflationary impact.

Despite having no legal claim, large retailers like Walmart are pressuring their suppliers to share tariff refunds. They use their immense purchasing power as leverage, threatening to delist products if suppliers don't share a portion of the government payout.

The inflationary impact of tariffs is appearing slower than economists expected. Companies are hesitating to be the first to raise prices, fearing being publicly called out by politicians and losing customers to competitors who are waiting out the trade policy uncertainty.