Trump tariffs could add $40 billion to holiday shoppers' and sellers' costs, LendingTree warns
News Summary
According to LendingTree's analysis, President Donald Trump's tariffs are expected to add a total of $40.6 billion to American consumers' and retailers' costs this upcoming holiday season. Consumers are projected to bear the brunt of this, facing an estimated $28.6 billion in extra costs, which translates to approximately $132 per shopper. Retailers are expected to absorb the remaining $12 billion. Matt Schulz, LendingTree's chief consumer finance analyst, highlighted that an extra $132 is significant for most American families and could prompt them to cut back on gift-giving or take on additional debt. Both retail analysts and Schulz anticipate that consumers will purchase fewer items this holiday season due to the higher costs imposed by the tariffs. LendingTree estimates that holiday electronics buyers will see the biggest hit, with an average extra cost of $186 per shopper, followed by clothing and accessories at $82, personal care items, beauty products, and toys at $14, and food and candy at $12.
Background
This news report comes six months after President Trump announced his broad "liberation day" tariffs. While prices for select food and consumer goods rose in the immediate wake of that announcement, the full impact is expected to become evident during the holiday season as items stored in warehouses for months finally hit store shelves. Since his re-election in November 2024, the Trump administration has re-emphasized protectionist trade policies, utilizing tariffs to reshape global supply chains, bolster domestic industries, and secure more favorable trade terms. LendingTree's analysis, referencing 2024 winter holiday spending data, projects the impact of these new tariffs on the 2025 holiday shopping season.
In-Depth AI Insights
What are the deeper economic and political strategies underpinning the Trump administration's tariff policies? - Beyond the stated goals of protecting domestic industries and reducing trade deficits, these "liberation day" tariffs likely serve as strategic leverage in negotiations with key trading partners. The objective is to compel these nations to renegotiate trade agreements, aiming for broader economic and geopolitical advantages. - Domestically, this move fulfills campaign promises and solidifies support among specific voter demographics, particularly in manufacturing and traditional industrial regions heavily impacted by globalization. By emphasizing "America First" and reshoring manufacturing, the administration seeks to capitalize politically on economic nationalism. How might these tariffs strategically reshape consumer spending patterns and retail sector profitability beyond a single holiday season? - Consumer behavior could undergo a structural shift: As import prices rise, consumers may pivot towards lower-cost alternatives, including domestic products or previously overlooked brands. This could accelerate a decline in brand loyalty and increase price sensitivity among shoppers. - Retail profitability models face challenges: Retailers will contend with margin compression—either absorbing a portion of the tariff costs to remain competitive or passing them on to consumers, risking sales volume. This may lead retailers to re-evaluate global sourcing strategies, investing more in supply chain diversification and regionalization, and potentially increasing domestic production, fundamentally altering their long-term cost structures. What are the potential second-order effects of prolonged tariff implementation on inflation expectations and monetary policy? - The cost-pass-through effect of tariffs could exacerbate inflationary pressures, particularly in consumer goods, leading to a broader increase in prices. LendingTree's data on direct cost increases serves as a leading indicator of this potential inflation. - If inflation remains elevated and above the Federal Reserve's target range, the Fed might be compelled to maintain a hawkish monetary policy stance or delay potential rate cuts, even in the face of economic growth headwinds. This would impact interest-rate-sensitive assets like real estate and growth stocks and could lead to higher borrowing costs, further dampening consumer and business investment.