Holiday Spending: Tariffs May Nudge Prices, but Not Shoppers
News Summary
Ahead of the 2025 holiday shopping season, PYMNTS Intelligence data indicates that 85.2% of goods-sector firms and 80% of companies overall are highly confident in their ability to adapt to tariff-related supply-chain disruptions. Despite price increases implemented by most goods and services firms, approximately three-quarters of goods firms still experienced margin compression. Retailers are planning modest, selective price adjustments to preserve consumer volume and safeguard margins as much as possible. On the demand side, consumers are increasingly using structured payment tools, such as private-label and general-purpose credit card installments, to manage higher prices rather than pulling back on spending. Buy Now, Pay Later (BNPL) services are a significant shock absorber, with 90% of surveyed merchants stating BNPL helped sustain sales, and nearly half of consumers abandoning purchases if installment options were unavailable. The article concludes that both merchants and consumers are demonstrating controlled adaptation; tariffs may raise costs but will not deter the determination to shop.
Background
Since 2018, tariff policies between the United States and its major trading partners have been subject to dynamic changes, particularly during the Trump administration. These tariffs, aimed at protecting domestic industries or serving as trade negotiation leverage, have also posed challenges for businesses reliant on global supply chains, potentially leading to increased costs for imported goods. Following President Trump's successful re-election in the 2024 presidential election, it is widely anticipated that his "America First" trade policies, including the use of tariffs as an economic tool, will continue or even intensify. Retailers and consumers therefore face ongoing adaptation to price pressures and supply chain adjustments resulting from such policies.
In-Depth AI Insights
What is the true impact of current tariff policies on corporate profits? - Despite widespread corporate confidence in adapting to tariffs, the report explicitly states that most goods firms raised prices over the past year yet still experienced margin compression. This suggests that the cost pass-through of tariffs is not fully effective, or the cost increases are greater than what retailers can pass on to consumers. This likely reflects intense market competition and high consumer price sensitivity, forcing businesses to absorb part of the costs to maintain market share. What are the potential long-term implications of widespread Buy Now, Pay Later (BNPL) adoption for overall economic stability and consumer debt? - While the extensive use of BNPL and credit card installments helps consumers manage inflation and tariff-driven price increases in the short term, sustaining demand, it may mask underlying issues of declining consumer purchasing power in the long run. This spending pattern could lead consumers to over-rely on credit to maintain their lifestyle, potentially increasing household debt risks and amplifying default risks during economic downturns. For retailers, while BNPL boosts conversion rates, it might also entail higher transaction costs and potential bad debt risks. What does the Trump administration's trade policy signify for the long-term strategic positioning of the retail sector? - Given President Trump's re-election and his continued tariff strategy, supply chain diversification and localization for retailers will likely evolve from short-term coping mechanisms into long-term strategic investments. Companies will be compelled to re-evaluate their global sourcing networks, more actively seek alternative suppliers, and potentially consider relocating parts of their production or assembly back domestically or to friend-shoring countries. This will not only alter global trade flows but could also fundamentally change the cost structure for certain goods, profoundly impacting investment prospects across specific industries.