Tariff Tensions: The impact on U.S. retail and consumer sectors

The latest wave of tariffs introduced by the U.S. administration threatens to disrupt the retail and consumer landscape, posing fresh challenges for businesses already contending with economic volatility. Unlike the trade tensions of 2018, which largely spared broad consumer segments, this new tariff regime casts a wider net.

“Broad-based tariffs could hurt more U.S. consumer products and retail companies this time around than in 2018, which was more manageable. Over 24 percent of retail credits and 19 percent of consumer credits have negative outlooks, indicating an above-average negative bias and little headroom for additional macroeconomic pressures,” says, Bea Chiem, Retail & Consumer Managing Director, S&P Global Ratings.

With inflationary pressures still lingering and consumer sentiment fragile, companies are likely to find it increasingly difficult to pass on cost hikes to shoppers. In a retail landscape where discretionary spending is under pressure, the ability of brands to absorb tariff-related cost increases without sacrificing margins will vary significantly by subsector, supply chain structure, and pricing power.

Diverse impacts

President Trump’s decision to impose a 25 percent tariff on imports from Mexico and Canada—alongside a 10 percent levy on certain Chinese goods—has prompted retaliatory measures from China, with counter-tariffs ranging from 10 percent to 15 percent on U.S. exports. This escalation introduces complexities for retailers, consumer goods firms, and restaurant operators, all of whom rely heavily on cross-border supply chains.

While some businesses have diversified sourcing since the previous tariff cycle, the broader application of tariffs in 2025 creates a more challenging environment. Given the rising cost of goods—up 25-30 percent since 2018—companies must balance cost management strategies with consumer affordability. Retailers, in particular, will need to carefully evaluate how much of the burden can be transferred to consumers before demand weakens further.

Supply chain shifts and strategic adaptation

Since 2018, U.S. imports from China have declined to 13 percent from 21 percent, while Canada and Mexico now represent 29 percent of all U.S. goods imports. These shifts have been driven by supply chain diversification, which has offered some insulation from tariff shocks. However, with higher energy tariffs on Canadian imports and potential universal tariffs looming, logistics and operational costs are set to rise across the board.

Companies must now weigh the financial and operational implications of relocating production, adjusting supplier networks, or absorbing higher costs.

With tariffs set to take effect over the coming months, the retail and consumer industries are bracing for another test of resilience. Whether through supply chain agility, pricing strategies, or strategic promotions, companies will need to adapt swiftly to maintain profitability in an increasingly complex trade environment.