Tariffs Causing Retail Uncertainty
While economic fundamentals appear solid at the halfway point of the year, uncertainty is pervasive. This is according to Jack Kleinhenz, chief economist at National Retail Federation (NRF) and author of NRF's Monthly Economic Review, July edition.
“This year began with high expectations for the strength of the U.S. economy,” Kleinhenz said, noting strong 2.8% year-over-year growth in gross domestic product in 2024 that was led by consumer spending and helped by business and government spending. “Since then, anxiety and confusion have taken center stage in the economy and financial markets as uncertainty over public policy has intensified. It was difficult to judge how policy changes would impact the economy in early 2025 and it remains so now.
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“There are many crosscurrents surrounding tariffs, immigration and deregulation, and everyone is sorting through what the tariff rates are going to be, how they will impact inflation for retail products and, importantly, how long they will be in place,” continued Kleinhenz.
Food prices continue their own familiar pattern of volatility. According to the latest government data, the Consumer Price Index (CPI) for food at home rose 0.3% from May to June and was up 2.2% on a 12-month basis.
Kleinhenz points out that Fed officials are closely watching the “inflation psychology” of consumers — how their expectations about future inflation influence their current spending and savings decisions and whether they are influenced by short-term price increases.
According to the U.S. Census Bureau, consumers are indeed reining in their grocery spending. Its the latest report shows that overall retail and foodservice sales dipped 0.9% and grocery sales slid 0.8% from April to May.
Meanwhile, supply chain software company Blue Yonder's recently conducted its own global research, releasing its 2025 Global Consumer Sentiment on Grocery Inflation Survey that examined how sustained inflation, supply chain challenges and global tariffs are influencing grocery spending. The survey, which polled consumers across Australia and New Zealand, France, Germany, the Middle East, the United Kindgom, and the United States, found that 85% of overall respondents are concerned about inflation’s impact on grocery prices, illustrating consumer unease and clear changes in purchasing decisions across the world.
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Consumers in the United States (65%), the U.K. (56%) and the Middle East (50%) feel global tariffs are the leading cause of rising prices.
Almost two-thirds of consumers (65%) report they would buy fewer grocery items across categories to cope with price increases, while 42% would shop at discount and wholesale stores. In addition, approximately one-third would prefer shopping based on promotions and discounts (36%) and switching to private label brands (34%). Alcohol is facing the biggest budget cuts compared to other grocery categories, with one-third (33%) of consumers saying they would reduce alcohol purchases in response to inflation price increases.
Washington, D.C.-based National Retail Federation advocates for the people, brands, policies and ideas that help retail succeed. According to the organization, retail is the nation’s largest private-sector employer, contributing $5.3 trillion to annual GDP and supporting more than one in four U.S. jobs — 55 million working Americans.
