U.S. consumers increased their spending in March, driven by a surge in big-ticket purchases like gadgets and cars before President Trump’s new tariffs took effect. According to the Commerce Department, retail sales grew by 1.4% in March, following a modest 0.2% increase in February. In contrast, January saw a 1.2% drop, partly due to cold weather that kept many shoppers inside, which hurt car dealerships and other stores.
When excluding auto and parts sales, retail sales only saw a 0.5% rise in March. However, sales at auto dealers rose by 5.3%, showing strength in that category. Electronics retailers saw a 0.8% increase, sporting goods retailers enjoyed a 2.4% gain, and grocery stores experienced a 0.1% increase. Clothing and accessories stores had a 0.4% boost, while online retailers grew by 0.1%, and restaurants saw a 1.8% uptick. Furniture and home furnishing stores, however, saw a 0.7% decline.
Christopher S. Rupkey, chief economist at FWDBonds LLC, noted that March’s retail numbers indicated a rush of buying, likely in anticipation of rising prices due to upcoming tariffs. He suggested that consumers were rushing to make purchases before prices increase further.
Retail experts expect sales to slow down as tariffs increase costs for businesses, forcing many retailers to raise their prices. This is likely to dampen demand. Consumer confidence has already been affected, with many retailers halting shipments from China or delaying orders as they await clarity on tariff impacts. In some cases, they are even canceling orders.
The current trade situation has led to an average tariff rate of 10% on imports from most countries, with goods from China facing duties as high as 145%. Imports from Canada and Mexico are subject to tariffs up to 25%, and steel and aluminum, as well as imported autos, are taxed at the same rate. In response, China imposed a 125% tariff on U.S. goods last week.
Earlier this month, Trump announced significant tariffs on almost all U.S. trading partners. However, he later paused tariffs on about 60 countries for 90 days, though the overall average tariff on U.S. imports remains significantly higher than before. The administration also announced temporary tariff exemptions on electronics like smartphones and laptops but made it clear this was only a temporary reprieve.
Amid the uncertainty, consumer sentiment has plunged. The University of Michigan’s consumer sentiment index dropped 11% in April, marking its fourth consecutive monthly decline. This dip signals widespread anxiety about job cuts and rising inflation caused by the ongoing trade wars.
Ryan Petersen, CEO of Flexport, mentioned that companies he works with have already raised prices by 5% to 10% due to higher tariffs. He added that the full impact of these tariffs has yet to be felt, and once goods are subject to higher duties, businesses will have no choice but to pass those costs onto consumers. He also highlighted how difficult it is for companies to make long-term investments with so much uncertainty in the market.
Larger retailers, analysts say, will have a better chance of managing these challenges compared to smaller ones, which lack the clout to absorb extra costs or pressure suppliers. Some retailers are taking a “wait and see” approach to ordering goods, especially for seasonal items, due to the unpredictability surrounding tariffs.
Walmart executives remain optimistic about their ability to maintain low prices despite the tariff situation, though they acknowledge that short-term volatility remains a challenge. Walmart’s CEO Doug McMillon said the company is prepared to face these challenges head-on, despite the fluid tariff environment.
Amazon’s CEO Andy Jassy mentioned that the company is working hard to keep prices low by bringing in goods early and negotiating with suppliers. However, he pointed out that some third-party sellers may pass on the higher costs to consumers. Jassy also noted that while some shoppers are stocking up in anticipation of price increases, the data on this behavior is still limited.
According to Bloomreach, a firm that tracks sales from over 1,000 brands, North American e-commerce revenue increased slightly by 0.4% during the week of March 31 compared to the first week of March. Sales saw a bigger jump—6%—from the week of March 24 to March 31, with online apparel sales soaring by nearly 45% in that final week of March.