Amazon CEO Andy Jassy just articulated the inflection point that transforms tariff policy from abstract cost into consumer-facing inflation. Today at Davos, he confirmed what the supply chain math predicted: sellers' pre-tariff inventory buffers have depleted. That bought them 60-90 days of absorption. It's over. Mid-single digit retail margins can't absorb 10% cost increases. Pricing pass-through accelerates now.

This is the moment when Amazon CEO Andy Jassy just articulated the inflection point that changes the tariff story from abstract policy to consumer-facing inflation. January 20, 2026 marks when the buffer runs out. The narrative is clear and backed by real business dynamics: sellers anticipated Trump's tariffs by pre-purchasing inventory in bulk starting in 2024. That strategy bought time. It's exhausted.

Most of that pre-bought stock ran out around fall 2025 according to Jassy's comments at the World Economic Forum in Davos. Now comes the reckoning for retail economics. When your operating margins are mid-single digits—typically 3-5% for most retail categories—and your input costs spike 10%, the math is unforgiving. There's nowhere left to absorb it.

Jassy laid it out simply: "At a certain point, because retail is a mid-single digit operating margin business, if people's costs go up by 10%, there aren't a lot of places to absorb it. You don't have endless options." This represents a stark shift from his messaging just months ago. Last June, Jassy said Amazon hadn't seen prices appreciably increase despite the tariffs. Last April, he predicted some pass-through would come. But timing matters. Now it's happening.

The mechanics are straightforward. Amazon merchants and third-party sellers bought inventory ahead of tariff implementation to maintain price competitiveness and preserve margin. That's sound short-term strategy. But inventory turns over in 60-90 days for most retail categories. Once that buffer is gone, the next shipment comes in at tariff-adjusted costs. Either you absorb it or you pass it through. Absorption erodes margin. Pass-through raises prices. There's no third option.

What we're seeing is sellers bifurcating their response. Some are passing full tariff costs to consumers. Others are absorbing costs to protect volume and demand. Most are splitting the difference—raising prices moderately while accepting lower margins. This isn't uniform price increases; it's category-by-category, seller-by-seller pricing decisions that collectively amount to an inflation signal.

The evidence of behavior change is already visible. Jassy noted Amazon is observing consumers "trading down to lower priced items and bargain hunting." That's inflation response—the substitution effect in real time. When prices rise, buyers shift to lower-cost alternatives. Some are also delaying discretionary purchases entirely. This is where the demand destruction threshold lives—the point where price increases become demand killers rather than margin protectors.

The timeline confirms what supply chain analysts predicted months ago. When tariffs were announced in April 2025, forward-thinking sellers had roughly 60-90 days to pre-purchase before tariffs took effect. Most ordered aggressively in May-June 2025. That inventory began moving in July-August. By November-December, the pre-tariff stock was largely gone. January is the first full month of pricing decisions on tariff-inclusive input costs. This is the inflection.

For different audiences, the implications vary sharply. Enterprise decision-makers need to reassess 2026 procurement budgets and supplier pricing agreements immediately. The gap between when tariffs were announced and when they hit profit-and-loss statements was roughly 8-10 months. That window is closing. Investors should recalibrate retail valuation models—margin assumptions built on 2025 levels won't hold. Margin compression of 50-150 basis points is coming within weeks for retailers heavy in imported goods. Supply chain professionals need to validate that pricing infrastructure can adjust dynamically. Companies locked into fixed-price contracts with customers for Q1 2026 face margin erosion; those with dynamic pricing or contract reset clauses fare better.

Historical parallel: This mirrors the 2008 commodity spike when input costs rose faster than retailers could adjust pricing, compressing margins industry-wide. That cycle played out over 6-9 months before demand destruction and cost stabilization reset margins. Expect similar timing here, though the mechanism is policy-driven rather than commodity-driven.

The next 30-60 days reveal whether pass-through flows fully to consumers or demand destruction limits inflation. Watch for three signals: Amazon's own disclosure on third-party seller pricing trends in their next earnings call, retail comparable sales by category (discretionary vs. necessities show different elasticity), and third-party seller guidance on margin pressure. If inflation passes through without demand destruction, expect investor rotation out of retail valuations into less price-sensitive sectors. If demand destruction dominates, watch for retailer guidance cuts.

Jassy's Davos comments mark the moment when tariff policy transitions from supply-chain cost to consumer-facing inflation. The pre-tariff inventory buffer that bought sellers 8-10 months of cost absorption is depleted. For enterprise decision-makers, this means immediate procurement reassessment—supplier costs are rising and pricing power is limited. Investors should prepare for retail margin compression within weeks, with valuation corrections following. Builders and supply chain professionals should prioritize dynamic pricing infrastructure. The critical 30-60 day window ahead determines whether full inflation pass-through occurs or demand destruction limits it. Monitor Amazon's next earnings call for seller margin data, retail comparable sales for category-level demand signals, and third-party seller commentary on pricing power.