The news: President Donald Trump announced in a social media post that he hiked the tariffs imposed on China to 125%, while also disclosing that he lowered reciprocal tariffs on other trading partners to 10% for a 90-day period.

The news came about 13 hours after reciprocal tariffs on 56 nations and the European Union went into effect, fueling market turmoil and stoking fears of a global recession.

The impact on retail sales: While major uncertainty remains around the breadth, depth, and impact of the tariffs—especially as the goalposts continue to shift—we expect Trump’s trade policies to significantly affect US retail this year by driving up everyday prices and slowing sales growth.

To reflect the uncertainty around the tariffs, we’ve developed three possible scenarios to show retail spending in 2025.

• Limited tariffs: Our existing forecast, produced in Q1 2025, now serves as the scenario with the least amount of disruption. It assumes tariffs are more limited and apply only to a select group of trading partners. Under this scenario, we expect retail sales to grow 2.9% YoY.
• Moderate tariffs: The economy slows, but the downturn is mitigated by partial tariff relief stemming from positive negotiation outcomes with key trading partners. Under this scenario, which mirrors the current 90-day situation, we expect retail sales to grow 1.2% YoY.
• Heavy tariffs: Full implementation of universal and reciprocal tariffs triggers a global recession, with inflationary pressure, retaliatory measures, and a severe shock to both business sentiment and consumer confidence. Under this scenario, we expect retail sales to fall 1.0%.

Our take: The Trump administration’s trade policies are fueling uncertainty among consumers and businesses, reshaping the retail landscape in ways that would have been hard to imagine just months ago.

Go further: For a deeper dive into the wide-ranging implications of the Trump administration’s trade policies on brands, retailers, and media players, read our report, “Impact of Tariffs on US Businesses.”

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