What: Consumer spending patterns face imminent transformation as Trump's 25% tariffs on Canada and Mexico, plus 10% on Chinese goods, threaten to reshape retail pricing and shopping behaviour.

Why it is important: The convergence of tariffs with existing inflation concerns signals a transformative moment in consumer behaviour, pushing retailers to restructure their operations while creating opportunities for alternative retail channels like secondhand and off-price.

The imminent implementation of Trump's tariffs is creating significant anxiety in the US retail market, with consumers and brands alike preparing for substantial changes. The comprehensive tariff package includes 25% duties on Canadian and Mexican imports, alongside an additional 10% tariff on Chinese goods, all set to take effect next week. Consumer sentiment has already responded, with 62% expressing concern about rising apparel costs due to new trade policies. The Conference Board's Consumer Confidence Index reflects this anxiety, showing its largest monthly decline since August 2021.

The impact extends beyond immediate price concerns, as retailers anticipate shifts in shopping behaviour. Industry experts predict a two to three-month lag before consumers feel the full effect of tariff increases, as retailers work through existing inventory and gradually adjust prices to maintain market stability. The changes are expected to particularly affect full-price fashion brands targeting aspirational consumers, while luxury brands may remain relatively insulated. Alternative retail channels, including fast fashion, off-price retailers, and secondhand markets, are positioned to benefit as consumers seek more affordable options.

IADS Notes: The current consumer anxiety about Trump's tariffs reflects significant market developments throughout 2024 and early 2025. In January 2025, BCG projected that a 60% tariff on Chinese goods would add USD 640 billion to US import costs, fundamentally reshaping retail economics. This concern has already manifested in concrete policy changes, with February 2025 seeing the elimination of the USD 800 de minimis rule, affecting millions of daily shipments and forcing retailers to restructure their operations. The impact extends beyond direct cost implications; October 2024 port strikes disrupted over 100,000 shipping containers, compelling retailers to adopt more agile supply chain strategies. Companies are actively responding, as evidenced by Shein's February 2025 initiative offering 30% higher procurement prices to manufacturers willing to relocate to Vietnam. Consumer confidence has responded accordingly, with the Conference Board's index showing its largest decline since August 2021, reflecting broader market anxiety about potential price increases and economic uncertainty.

How will consumers respond to Trump’s tariffs?