The anniversary: The Trump administration entered office on January 20, 2025, with consumer demand on solid footing. But that strength proved short-lived. As President Donald Trump’s trade agenda quickly took center stage, prices rose and average monthly consumer sentiment fell roughly 15 points YoY, per the University of Michigan.

Zooming in: Tariffs quickly became a cornerstone of the administration’s economic policy and a major source of disruption. Since Trump took office, the average effective tariff rate has surged from 2.4% to 16.8%, the highest level since 1935, according to the Yale Budget Lab.

• Those duties were implemented in fits and starts, allowing retailers to pull forward inventory and sidestep tariffs on holiday-bound goods. That flexibility muted the near-term impact relative to expectations (including ours), prompting us to revise our retail sales forecast twice last year. Our forecast for 2025 holiday retail sales growth, for example, dropped to 1.2% in May but rebounded to 3.6% by October, only slightly below our initial outlook.
• Even so, the distributional effects are becoming clearer. Higher-income households continue to spend, while lower- and middle-income consumers are pulling back, deepening a K-shaped economy. Although tariffs haven’t hit as hard as feared, higher levies have still pushed prices up, disproportionately burdening lower-income households, which devote a larger share of spending to essentials.

Beyond direct costs, policy volatility itself has become a structural drag. The administration’s tendency to regularly float new tariffs—including duties tied to countries that oppose its push to acquire Greenland—has made planning and investment more difficult across retail.

Ecommerce implications: The administration’s trade agenda has also upended cross-border online retail. Companies such as Temu and Shein built their US businesses around the de minimis exemption, which allowed packages valued at up to $800 per recipient per day to enter the US duty-free.

That exemption began to unwind in May for shipments from China and Hong Kong before expanding globally in late August. The impact was swift: After more than doubling between 2020 and 2024, de minimis volumes fell nearly 31% last year—even though the policy shift was implemented only partway through the year.

While the de minimis rollback temporarily leveled the playing field for domestic online retailers, its durability is far from certain. Like many of the administration’s trade actions, the policy relies on emergency authority now under Supreme Court review, where several conservative justices have signaled skepticism.

An adverse ruling—which appears likely—would force the administration to pursue alternative tariff authorities that carry tighter constraints and higher legal risk. That pivot could prolong uncertainty just as retailers begin adjusting to the new normal.

Implications for retailers and brands: In less than a year, Trump has pushed core US retail sales onto a downward growth trajectory through 2029. Consumers will continue to spend, but we expect growth to decelerate across core categories—including health and beauty and apparel—while excluding auto and parts, diesel fuel, and gasoline.

Go further: Read more about how the Trump administration has affected retail and other industries in our report, “President Trump’s Second Term: How the Administration Has Shifted Retail, Media Advertising, Tech, Health, and Finserv.”