Americans turn cautious and retail sales slide after a spring rush to
beat tariffs
[June 18, 2025] By
CHRISTOPHER RUGABER and ANNE D'INNOCENZIO
WASHINGTON (AP) — Retail sales fell sharply in May as consumers pulled
back from a spending surge early this year to get ahead of President
Donald Trump’s sweeping tariffs on nearly all imports.
Sales at retail stores and restaurants dropped 0.9% in May, the Commerce
Department said Tuesday, after a decline of 0.1% in April. Sales jumped
1.5% in March. The figure was pulled down by a steep drop in auto sales,
after Americans ramped up their car-buying in March to get ahead of
Trump’s 25% duty on imported cars and car parts. Excluding autos, sales
fell 0.3% in May.
The sales drop is hitting after sharp declines in consumer confidence
this year. Still, inflation has cooled steadily and unemployment remains
low, which could fuel steady spending in the coming months, as the
economy has remained mostly solid.
A category of sales that excludes volatile sectors such as gas, cars,
and restaurants rose last month by 0.4%, a sign that consumers are still
spending on some discretionary items.
Overall, the report suggests consumers have pulled back a bit but not
dramatically so. The retail sales report covers about one-third of
consumer spending, with the other two-thirds consisting of spending on
services. Economists expect overall consumer spending to grow in the
April-June quarter.
“Today’s data suggests consumers are downshifting, but they haven’t yet
slammed the brakes,” Ellen Zentner, chief economic strategist for Morgan
Stanley wealth management, said in an email. “Like the economy as a
whole, consumer spending has been resilient in the face of tariff
uncertainty.”
Yet many categories saw sharp declines. Car sales plunged 3.5%, while
sales at home and garden centers dropped 2.7%. They fell 0.6% at
electronics and appliance stores and 0.7% at grocery stores. There were
some bright spots: Sales rose 0.9% at online retailers, 0.8% at clothing
stores, and 1.2% at furniture stores.
Gas station sales dropped sharply, by 2%, but that mostly reflects lower
prices. The retail sales report isn't adjusted for inflation.
Sales at restaurants and bars, a closely watched indicator of
discretionary spending, fell 0.9% in May, though that followed a solid
gain of 0.8% in April.
Some consumer products companies say they are seeing the impact of
tariffs on their own costs and sales.
Paul Cosaro, CEO of Picnic Time, Inc., which makes picnic accessories
like baskets, coolers, and folding chairs, said that orders from
retailers are down as much as 40% this summer compared with a year ago.
His company sells to a variety of stores like Target and
Williams-Sonoma.
Cosaro noted that some stores have been cautious because they’re not
sure how shoppers will react to higher prices. Some canceled orders
because Cosaro couldn’t tell them how much the new prices would be due
to all the uncertainty. Roughly 80% of the company's goods are made in
China, with the rest in India and Vietnam.
The company, founded roughly 40 years ago and based in Moorpark,
California, was forced to raise prices on average from 11% to 14% for
this summer selling season, Cosaro said.
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Shoppers pass a Victoria's Secret store at a shopping mall in
Scranton, Pa., May 3, 2021. (AP Photo/Ted Shaffrey, file)
A folding outdoor chair now costs $137 this month, up from $120 in late
2024, he added. The company's sales are still down this year, even
though some shoppers accelerated their purchases out of concern that
prices would rise.
“Shoppers are very price sensitive,” Cosaro said.
The company has implemented a hiring freeze because of all the extra
tariff costs, he added. So far this year the company, which employs from
70 to 100 people, has had to pay $1 million in tariffs. A year ago at
this time, the bill was a third of that amount.
Liza Gresko, a 42-year-old mother of three in Doylestown, Pennsylvania,
said she has watched as prices for basics like toothpaste or shampoo
begin to rise again, and has started to buy groceries in bulk to save
money, as well as switching to generic brands.
“If I make these small changes, then we are sacrificing for the long
term goal of saving more,” Gresko said.
She has also begun shopping at thrift stores for children's clothes,
rather than Macy’s or H&M.
“Even with store sales and discounts, the rising costs make it
unsustainable to continually purchase new clothing,” she said.
The retail sales report comes as other evidence indicates shoppers have
been pulling back more amid worries about higher prices from Trump’s
tariffs.
Naveen Jaggi, president of retail advisory services in the Americas for
real-estate firm JLL, said that he’s hearing from malls that sales are
slowing down heading into the official summer months. Retailers are
pushing up back-to-school promotions to this month from July, he said.
They want to get shoppers in early for fear consumers may not want to
spend in the later months when prices will likely go up, he said.
So far, Trump's tariffs haven't yet boosted inflation. Consumer prices
rose just 2.4% in May compared with a year ago, the government said last
week.
Many stores and brands, including Walmart, Lululemon, and J.M. Smucker
Co., have said they plan to or have raised prices in response to
tariffs.
Deckers Outdoor, which is behind such shoe labels as Hoka and Uggs, said
late last month that it plans price increases, which will likely hurt
sales.
“We expect to absorb a portion of the tariff impact,” Chief Financial
Officer Steven Fasching told analysts. “We also believe there is
potential to see demand erosion associated with the combination of price
increases and general softness in the consumer spending environment.”
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D'Innocenzio reported from New York.
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