Amazon Shares Surge as U.S.-China Tariff Talks Take Positive Turn

Shares of Amazon (NASDAQ: AMZN) jumped nearly 8% as of 11:06 a.m. ET today. This increase followed a weekend agreement between U.S. and Chinese officials to pause high tariffs imposed on each other. As of this writing, Amazon is leading gains among stocks in the “Magnificent Seven,” primarily due to its strong business ties with China.

Significant Exposure to China

The agreement between the U.S. and China includes a 90-day break on elevated tariff rates. Previously, the U.S. had enforced levies of 145% on Chinese goods, prompting China to retaliate with 125% tariffs on U.S. exports. During this hiatus, tariffs on Chinese goods entering the U.S. will reduce to approximately 30%, while those on U.S. goods sent to China will drop to 10%.

Amazon stands to benefit greatly from this pause. Analysts at Raymond James estimate that around 30% of the company’s gross merchandise value comes from China. Additionally, about 14% of Amazon’s advertising expenditure in 2024 is expected to originate from Chinese advertisers, outpacing other companies in the Magnificent Seven.

In a research note released in late April, Raymond James highlighted that many investors had underestimated the effects of tariffs and the broader economic climate on Amazon’s earnings. Consequently, this recent news could lead to upward revisions in those earnings forecasts.

Image source: Getty Images.

Watch Ongoing Trade Negotiations

Although the weekend’s announcement marks a promising initial step, the ultimate outcomes of trade negotiations remain uncertain. Amazon had already positioned itself advantageously in the e-commerce, cloud, and artificial intelligence (AI) sectors. With the most intense phase of the U.S.-China trade conflict likely behind, the stock may experience smoother sailing in the months to come.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.