Anne D’Hynenzio from Apsion Press Retail Writer
NEW YORK (AP) – US shoppers bolstered their shopping last month, spurring large ticket items, especially cars, before President Donald Trump’s vast new tariffs begin.
However, analysts quickly pointed out that while data is not a sign of strength, they highlighted the extreme economic uncertainty faced by shoppers and how to go ahead with higher prices.
According to the Commerce Department, retail sales rose 1.4% in March after a 0.2% increase in February. Retail sales fell 1.2% in January, with some damaged by cold weather, with more Americans keeping more people indoors and ceasing sales at car dealers and most other stores.
Excluding sales at automobile and parts dealerships, sales in March increased by 0.5% compared to the previous month.
Sales at automotive and parts dealers increased by 5.3%, and the report highlights strength elsewhere. Sales rose in electronics stores, sports goods retailers, and clothing and accessories stores. Both grocery stores and online retailers increased by 0.1%. Restaurants increased by 1.8%. However, furniture and furniture stores recorded a decline.
Christopher S. Rupkey, Chief Economist at FWDBonds LLC, said: “Consumers expect prices to be significantly higher the following year, and they clean up store shelves and pick up bargains whenever possible.”
Economists expect sales to decline over the next few quarters.
“As tariffs fall, the economy will be rapidly cooler over the coming months, so price-sensitive consumers are more wise to spend and are poised to reduce mandatory purchases,” EY senior economist Lydia Boussour wrote in a note Wednesday.
Consumer confidence is already a hit. And growing numbers of retailers and suppliers have suspended freight from China and suspended orders as they wait to see where tariffs settle. In some cases, orders may be cancelled.
The outcome of previous trade wars: 10% of most countries’ baseline tariffs, imports from China are taxed at a total of 145%. Canadian and Mexican goods face tariffs of up to 25%, while imported cars, steel and aluminum are taxed at the same rate. China retaliated last week with a 125% tariff on US goods.
Earlier this month, Trump announced cleaning and sudden tariffs for almost all of his trading partners. But after Trump’s U-turn last week, which suspended new tariffs in around 60 countries for 90 days, the average US job remains much higher than it was a few months ago.
Last Friday, the Trump administration announced tariff exemptions on electronic devices such as smartphones and laptops, but said there will be a temporary reprieve in a few days.
Against this backdrop, US consumer sentiment plunged in April in a consecutive month of April.
Ryan Petersen, CEO of Flexport, a global logistics company based in San Francisco, has already seen companies increasing prices from 5% to 10%.
“These tariffs have not washed away the system yet, so there’s a good chance that more will happen,” he said. “So when the goods arrive to pay a higher obligation, people have no choice but to raise the price to accommodate that.”
He added that it is becoming more difficult for businesses to make investments and establish supply networks.
“It could all change soon,” he said. “Before you invest, you need more certainty.”
Analysts say large retailers can navigate better than small retailers who have no influence to absorb the extra costs or put pressure on their suppliers. However, it also depends on the type of product they sell, especially if they have a source of goods from overseas.
Ashley Hetrick, principal and leader in the sourcing and supply chain segment at accounting firm BDO, noted that stores have taken a “viewed as a wait” approach when it comes to ordering products, and that they are more cautious when ordering seasonal items due to short shelf life. She said cancellations of orders have not been widespread.
Last week, Walmart executives offered a dose of confidence that retailers would continue to offer low prices as Trump escalates trade war with China.
But the country’s biggest retailer, whose competitive prices have become a powerful magnet for shoppers who withstand inflation, told analysts it remains vulnerable to the challenges and is monitoring the liquid tariff situation. The company told analysts that sales were unstable.
Amazon CEO Andy Jassy said last week that the company is doing everything it can to keep customers price low.
However, Jassy told CNBC’s Andrew Sorkin on Thursday that a network of third-party sellers must hand over the sellers high costs.
Paul Farago, president of Miami footwear company Ace Marks, said the big tariff bill on Chinese goods forced him to suspend production with the already cheaper version of the Ace Marks brand.
The “diffusion” line, made from synthetic materials in China, costs around $120. Farago estimates that the shoe line will cost around $300, the same price as the expensive leather version made by Italy. The diffusion line was developed three years ago and had already reached 10% of the entire business. Farago hoped to reach 30% to 40% of the company’s total sales by 2026.
Farago said he must disappoint many store clients and shoppers looking for affordable footwear. The new shoes were supposed to be shipped in June or July.
“The investment we were trying to hire and the people we would have hired to help us run this business. That’s off the table now,” he said.
Original issue: April 16, 2025 9:09am EDT
