The situation: President Trump’s shifting trade policies are introducing fresh volatility across sourcing, pricing, and promotional planning—setting the stage for an incredibly uncertain holiday shopping season.
- Balsam Hill, an online seller of artificial trees and holiday décor, is scaling back its catalog distribution and trimming its product assortment. CEO Mac Harman told the Associated Press that the administration’s changing tariff rates are forcing the company to continually reassess what products to order, where to import them from, and when they’ll arrive.
- Many retailers are scaling back their holiday orders to avoid being stuck with overpriced inventory if demand softens or duties spike—leaving them at risk of empty shelves during the peak season. The products that do make it onto shelves may carry higher prices due to the near-universal 10% tariff in place. Those rates could climb even more if the “reciprocal tariff” hikes are triggered after the August 1 deadline.
At the same time, consumer sentiment remains well below historical norms. That's a clear warning sign for retailers banking on Q4 revenues to make up for the rest of the year. Already, 53% of consumers expect to keep spending in line with last year, and another 18% expect to spend less, per a Salsify consumer survey. If macroeconomic conditions deteriorate further, those figures could rise.
Modeling the environment: With economic policy still in flux—including uncertainty over whether the August 1 deadline results in tariff hikes—we modeled three potential scenarios:
- Limited tariff scenario: Tariffs apply only to a small set of trading partners. With minimal disruption to global supply chains or pricing, retail sales would rise 3.9% YoY.
- Moderate tariff scenario (Baseline): Tariffs remain at current levels. While growth slows, it’s partly offset by pauses or negotiations with key partners. Under this scenario, holiday sales would grow 1.2% YoY.
- High tariff scenario: Tariffs remain elevated—or escalate—sparking inflation, trade retaliation, and a potential global recession. Confidence plunges, and sales decline 3.7% YoY.