Tariffs are pitting Trump against capital
Will he try to save himself by asking firms to absorb the soaring prices?
An intense microdrama that flared up Tuesday between the Trump administration and online retail giant Amazon may already be over, but the episode revealed a deeper conflict of interest between the two that’s unlikely to end anytime soon.
Earlier today, Punchbowl News reported that Amazon planned to prominently display next to its prices the added cost imposed by tariffs. The Trump administration furiously condemned the move as a “hostile and political act,” and by the end of the day — after a brief call between Trump and Amazon owner Jeff Bezos — the company announced that it would not display that tariffs costs.
Before that announcement, however, an anonymous Trump official made a revealing complaint to CNN: “Why should a multibilliondollar company pass off costs to its customers?”
The question brings to light a widely-neglected point about Trump’s tariffs. Liberals like Amy Klobuchar and conservatives like Ted Cruz have both panned the tariffs as “a tax on consumers,” and that language has even been adopted by some on the American left. But this rhetoric simply takes for granted that firms hit by tariff costs have to pass them along to consumers — and this isn’t actually true!
Companies can absorb at least some of the impact of tariffs by accepting lower profits. Consider Amazon, for example, which has so far marked up costs by an average 29% according to Business Insider. Meanwhile, Amazon’s operating margin in North America in 2024 was around 10.8%. So while it is unlikely that Amazon could even cut the tariff markup in half, it could in theory put a significant dent into the costs by aborbing some of them in profits.
In this way, Trump’s political incentives are directly at odds with the bottom line of every tariff-struck company in the US. His signature tariffs have raised costs for firms, but his pledge to lower prices for Americans means that firms can’t just pass those costs along to consumers without embarrassing him. As the full costs of the tariffs begin to kick in and Americans begin to rebel against high prices Trump will only have three choices: abandon the tariffs, abandon his promise to lower prices, or blame companies for refusing to accept lower profits.
So far the second option seems to be the most likely: thus we have Trump officials like Scott Bessent declaring that cheap goods are “not the essence of the American dream.” But as Trump’s approval ratings sink, his penchant for deflecting blame could very well incline him to take the third option and start accusing firms of profiteering. The liberal impulse will be to dismiss this as petty scapegoating, but instead of joining them in defense of capital, socialists should take this opportunity to tell the truth. Capitalism forces men like Bezos to ramp up prices in order to expand profits. Trump could stop this if he wants with all kinds of creative measures — price controls, profit ceilings, and so on1 — but he won’t, because despite his populist posturing, Trump is a capitalist too.
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Particularly since Trump does not seem to be bound at this point by any law or judicial precedent whatsoever, one thing he might in theory do is require retailers who display tariff markups to also display profit markups. But this comes awful close to undermining an important feature of modern capitalism: the way that it collapses all of the costs of production into a single price. Just imagine how consumers might react if every item they bought from Amazon displayed how much Jeff Bezos was making from it.