Tariff confusion shakes consumer confidence
April’s tariff announcements sparked widespread uncertainty. What began as a 10% universal tariff soon expanded into country-specific measures, with Chinese goods facing the steepest increases.
- As a result, consumer behavior is diverging. Some are accelerating purchases anticipating higher prices, while others are delaying non-essential spending.
- "I think people are weighing every single purchase decision that they make in a way that they probably weren't just a few months ago," said analyst Zak Stambor.
- This was evident in March data showing spikes in furniture, apparel, and auto sales.
Tariffs’ reach extends across categories
While tariffs on electronics and cars were expected, few consumers realize how global supply chains influence everyday goods.
"A lot of brands that we associate as being American are manufactured abroad," said Wolff. "Most of Pepsi's concentrate is made in Ireland... so even the price of soda is going up purely as a result of these new tariffs."
Unexpected categories like beer are also feeling the impact.
- Constellation Brands, owner of Corona and Modelo, revised its outlook due to tariffs on imported ingredients and steel and aluminum packaging.
- "We have a global supply chain that has very deep roots," said Stambor. "To uproot it all at once is jarring. It will have a ripple effect across a whole range of sectors."
Digital advertising takes a hit
The effects aren’t limited to goods. Social media companies are seeing online marketplaces like Temu and Shein slash ad spending.
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Social media ad growth could fall from around 13% to just 1.5%, a potential $10 billion impact, per an EMARKETER forecast.
- Overall digital ad spending could slow from 11.8% to 4.5%.
"As these companies see their margins being squeezed, they've got to protect their bottom line," said Stambor. "They're going to shift their advertising spending to where they can see the clear effect of that spending."
How retailers should respond
Retailers should monitor a few key indicators. Grocery inflation, which moves quickly through supply chains, will be an early sign of tariff impact. Employment metrics, such as job openings and unemployment rates, can signal how companies are reacting to economic pressure.
In the meantime, here are three immediate actions retailers can take.
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Reassess ad spend. "I would X out brand-building initiatives, focus on performance-based ad spending like search," said Stambor.
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Communicate pricing clearly. "With price increases likely to come, now is the time for brands to start the messaging around that," Wolff advised. "Be surgical about it. Tell shoppers, 'We're raising prices because our products come from X, Y, Z and now we're being charged X percent more.'"
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Map the supply chain thoroughly. Knowing where each component comes from and identifying alternatives is essential for future-proofing operations.
Unlike previous tariff rollouts, today’s economic conditions—marked by broader tariffs and a softening labor market—are making consumers more cautious.
“It is very hard for any company to make any sort of long-range plans, so you have to live in the moment,” said Stambor.
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