Consumers may have have overlooked the earlier rounds of tariffs that affected industrial materials and supplies because they don’t normally show up on most shopping lists.
But the latest round of 10% tariffs on Chinese imports—scheduled to take effect Sept. 1st—will hike up prices on pretty much everything Americans buy, including toys, smartphones, shoes, apparel, and furniture.
According to Kathy Bostjancic, chief U.S. financial economist for Oxford Economics, “The tariffs could cost the average household another $650 a year. . . . And the larger price tags could compel people to cut back on spending or make it tougher for them to pay their bills.”
How Tariff’s Are Influencing Consumer Spending
Even with the uncertainty over whether or not the tariffs will actually be implemented, consumers are mindful of the potential squeeze on their their wallets and are planning accordingly.
In fact, approximately 60% of shoppers say they’ll reconsider which retailers they shop at if the proposed tariffs on Chinese imports go into effect, according to a survey by Shopkick.
The same survey also discovered that:
- 44% of consumers will cut back on shopping.
- 25% of shoppers will start buying products made in America.
- 29% of consumers are stocking up on goods now.
Overall, 38% of shoppers expect household costs to increase as much as $500, and about 30% of consumers believe that the ongoing trade war will result in a hike of more than $1,000 in household expences.
While American retailers are trying to make adjustments whereever they can, many will still find it necessary to pass along a portion of the costs to shoppers if tariffs do indeed hit.
For large retailers (Walmart, Target, Costco) that sell general merchandice, nonfood products—such as apparel—will be the most susceptible to price increases. But it appears that these companies have already diversified their supply chains and pre-purchased goods ahead of further tariffs.
The Retail Doctor also suggests that businesses analyze their overall margins, as well as the categories they sell that are subject to the Sept. 1 tariffs, and weed out the products that aren’t generating much profit.
“The main characteristic of the global trade environment now is uncertainty,” states Joseph Foudy, a professor of economics at New York University’s Leonard N. Stern School of Business.
He goes on to say that a fair amount of that uncertainty centers around whether or not the U.S. will actually carry through on the tariff threats.
Regardless of the uncertainty, though, consumers are well-aware of the potential hit to their wallets, and they are planning accordingly.
Likewise, retailers should be prepared to shrewdly manage their respective companies as the market adjusts.
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