The news: US consumers are feeling the impact of real and perceived affordability pressures tied to the US trade war and the conflict in Iran.

Tariffs are back in the headlines. A new set of tariffs on the US’ largest trading partners took effect following the expiration of the temporary 10% global import duty that President Donald Trump put in place after the US Supreme Court ruled that he lacks emergency authority under the International Emergency Economic Powers Act (IEEPA). The new tariffs are broad in scope, covering countries responsible for more than 99.4% of US imports, per the US Trade Representative’s office.

At the same time, gas prices are rising. The escalation of the war in Iran has pushed oil prices higher, driving the national average gas price to $4.105, up 4.5% month over month and 29.8% YoY, per AAA. Perhaps more importantly, perception is amplifying the impact, as roughly 3 in 5 US consumers believe gas prices in their area have risen more than they actually have, per a new Politico poll.

The result is a growing sense of financial strain. The same poll found a majority of consumers (57%) say the cost of living is worse than they “can ever remember it being.” That isn’t surprising given that more than half of consumers identified gas and groceries as their top affordability challenges in a recent Harris Poll.

Why it matters: Costs are rising for businesses and consumers.

• The new tariffs will increase the average statutory tariff rate from 12.1% to 12.8%, per Yale Budget Lab, adding roughly $1,100 in costs for the average household.
• Rising gas prices are further eroding consumers’ spending power while increasing transportation costs for businesses.

Those pressures will likely result in higher prices. The Footwear Distributors and Retailers of America warned that new tariffs are pushing some companies’ input costs up by as much as 25%, which could translate into roughly a 5% increase in finished footwear prices for consumers.

Rising gas prices are already changing behavior. The surge in gas prices in May, for example, weighed on Tractor Supply’s results, as its customers are particularly sensitive to fuel costs given that they often drive long distances to shop. CEO Hal Lawton said customers are shopping more deliberately, consolidating trips, and prioritizing essential items while taking a more measured approach to discretionary purchases.

That shift is showing up more broadly. Roughly 3 in 5 US adults say they have changed their grocery shopping habits this year because of economic conditions, according to a CNN poll conducted by Social Science Research Solutions. That includes trading down to private labels, switching retailers, and simply buying less, which is evident in the nearly 2% YoY decline in grocery units sold in June, the fifth consecutive month of negative growth, per Bain & Company and NielsenIQ.

Implications for retailers and brands: Consumer spending has held up so far, with retail and food service sales up 5.1% YoY through the first half of the year, supported in part by one-off boosts like an earlier-than-usual Prime Day and the World Cup. But that resilience is showing cracks. Nearly 30% of US adults are using credit cards more frequently to manage inflation, while 28% have tapped into savings or reduced how much they save, per KPMG.