Etsy: How Severely Will Trump's Tariffs Weigh On Demand?

Etsy Inc's ETSY direct exposure to tariff-vulnerable countries, including Canada, Mexico and China, is limited, according to JPMorgan.

The Etsy Analyst: Analyst Bryan Smilek maintained a Neutral rating and price target of $50.

The Etsy Thesis: Etsy's marketplace does not have significant exposure to the impact of tariffs on Canada, Mexico, and China as less than 5% of its gross merchandise sales (GMS) are generated by US buyers that source from these three countries combined, Smilek said in the note.

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President Donald Trump is reportedly considering levying tariffs on imports from the European Union, which would "carry greater impact on GMS."

The analyst stated that to alleviate tariff headwinds, Etsy may promote domestic sales, like promoting Canadian goods to a Canada-based buyer. However, Etsy and other e-commerce companies may witness lower demand as sellers try to transfer incremental tariff costs to consumers, "driving increased pricing across the industry," he said.

"Beyond core demand, we believe Onsite Advertising growth (i.e. Etsy Ads, not Offsite Ads) could be impacted from demand/GMS headwinds, driving sellers to potentially rationalize costs against lower sales," Smilek further wrote.

Price Action: Shares of Etsy had risen by 1.32% to $49.17 at the time of publication on Wednesday.

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