Amazon shifted part of its Canadian sourcing from the US to China in order to evade tariffs.

      Amazon anticipates that package volume in Canada will increase by over 40% between 2026 and 2029, surpassing its growth in the US each year, as revealed in internal documents examined by Business Insider.

      A notable detail from a planning document from March indicates that Amazon has altered some of its Canadian direct-import sourcing from the US to China "to avoid tariffs," highlighting a US-based company circumventing US trade policy by decreasing its reliance on American products.

      The firm continued to outline its expansion strategies in late July, following Donald Trump's announcement on July 20 of an additional 50% tariff on select Canadian imports. These tariffs, effective this month, apply to certain goods that were previously protected under the US-Mexico-Canada Agreement.

      Earlier in March, Amazon had evaluated the tariff implications, determining that the impact would be smaller in Canada than in the US due to the USMCA coverage, but cautioned that "the risk of a Canadian recession is higher than usual due to US trade policy uncertainty."

      Now, exposure exists on both sides, as Canada has unveiled retaliatory tariffs on US imports starting September 8, impacting consumer goods such as appliances and electronics, which directly affects a specific aspect of Amazon's operations.

      This aspect is Remote Fulfillment, which allows third-party sellers to list items on the Canadian marketplace while storing inventory in US warehouses, with goods only crossing the border after a Canadian customer makes a purchase. A tariff on US consumer goods entering Canada specifically targets these shipments.

      An Amazon spokesperson stated that prices in the Canadian store "have not increased outside of normal fluctuations" and that the company is keeping an eye on the new tariffs for possible effects.

      Since 2010, Amazon claims to have invested over C$65 billion (approximately $47 billion) in Canada and currently employs more than 46,000 people there.

      The motivation to move forward is competitive rather than macroeconomic. A March document noted, "Amazon Canada faces a critical competitive challenge as major retailers are surpassing our delivery capabilities, jeopardizing future growth," mentioning Walmart, Loblaws, and Best Buy.

      The statistics behind this challenge deserve careful consideration. Amazon provides same-day delivery to around 54.5% of Canadian Prime members, while competitors reportedly serve 70% to 85% of Canadian households within two to four hours.

      These figures rely on different metrics and delivery speeds, so they aren't directly comparable; however, it's clear enough for Amazon's planners to have made the statement they did.

      Afterward, Walmart introduced Walmart+ in Canada, which offers unlimited same-day delivery, presenting a significant competitive threat.

      Fulfillment capacity also plays a crucial role, where warehouse automation becomes essential. European retailers have managed to increase throughput in existing facilities rather than expanding, exemplified by Decathlon doubling its output across seven locations using robotics instead of new constructions.

      Amazon's solution is proximity. Its plans indicate that 63% of Canadian shipments will be fulfilled within 160 miles of the customer and 93% within 1,000 miles by 2029, which presents a challenge related to warehouse placement before it involves technology.

      Complicating this is an economic inversion highlighted in the documents. The cost of third-party last-mile delivery in Canada is roughly half that of the US, diminishing the financial incentive for Amazon to manage deliveries internally, while speed has emerged as the competitive metric everyone is now investing in.

      The outcome is reflected in a specific decision. Amazon assessed 12 potential conventional delivery stations in Canada and found they would result in negative five-year returns, prompting a shift to more affordable partner-based models instead.

      The forecasts remain preliminary and subject to modifications. This caution is particularly significant given the document's timing between two rounds of tariffs.

      Historically, tariffs have proven to redirect trade more effectively than impeded it, as evidenced by US duties on Chinese electric vehicles, and Amazon's change in sourcing serves as a small example of this same trend.