Tariffs Drive Holiday Price Hikes, Impacting Consumer Spending
As the holiday season approaches, retailers are grappling with the escalating effects of tariffs on prices, particularly those catering to budget-conscious consumers. Target's CEO, Brian Cornell, had earlier dubbed price increases a 'last resort', while Walmart continues to hold off on raising prices. However, these measures may not be enough to shield consumers from the impact of tariffs, which are now affecting consumer confidence and spending patterns.
Throughout 2025, retailers and brands have been steadily increasing prices to offset the impacts of tariffs. This trend is most pronounced in the luxury goods sector, with mid-tier handbags and denim seeing significant price hikes. Despite these increases, wealthier households continue to spend more on high-end goods, while lower-income households are prioritizing essentials. This disparity in spending behavior is expected to persist through the remainder of 2025, with consumer spending growth remaining lackluster.
The upcoming September shoulder period, traditionally a time of increased consumer spending, may see a shift in consumer behavior due to tariff-related price increases. Off-price retailers are closely monitoring the price increases of mainstream retailers to maintain their competitive edge and attract price-sensitive consumers.
The tariffs' impact on prices is becoming more pronounced, affecting retailers and consumers alike. While retailers are implementing price increases to mitigate tariff impacts, consumers are adjusting their spending behavior in response. As the holiday season approaches, the tariff-related price increases may influence consumer spending patterns, potentially leading to a lackluster consumer spending growth through the remainder of 2025.
