Last month, U.S. consumers increased their spending on high-ticket items such as gadgets and cars. This was fueled by the rush to buy these expensive items before President Donald Trump’s new tariffs kicked in.
According to the Commerce Department, retail sales increased 1.4% in March after increasing 0.2% in February. Retail sales dropped 1.2% in January due to the cold weather, which kept many Americans inside. This affected sales at auto dealers and other stores.
Sales rose only 0.5%, excluding sales at auto and parts dealers.
Auto and parts dealers saw sales rise 5.3%. Electronics retailers experienced a 0.8% growth. Sporting goods retailers saw a 2.4% increase. Clothing and accessory stores experienced a 0.4% rise, while grocery stores saw an increase of 0.1%. Restaurants saw a 1.8% rise and online retailers a 0.1% increase. Furniture and home furnishings stores, however, posted a decline of 0.7%.
“These are simply blow-out numbers on March retail sales where the rush is on, like this is one gigantic clearance sale,” said Christopher S. Rupkey, chief economist at FWDBonds LLC, in a published note. Consumers are expecting sharply higher prices next year and are clearing the store shelves and picking up bargains while they can.
Analysts predict that sales will begin to fall as the tariffs raise costs for businesses and retailers are forced to raise prices, hurting consumer demand. The confidence of consumers has already been affected. As they wait for the tariffs to settle, a growing number of retailers and suppliers have halted shipments from China. They have also paused orders. Some retailers are canceling their orders.
Trade wars have so far resulted in a 10% tariff for most countries, while imports from China are taxed by a total of 145%. Imports of steel, aluminum, and autos from Canada, Mexico, and other countries are subject to tariffs up to 25 percent. China responded last week by imposing a tariff of 125% on U.S. products.
Trump announced steep and sweeping tariffs against nearly all trading partners early this month. After Trump’s U-turn last week, which paused new tariffs for 90 days on 60 nations, the average U.S. duty remains much higher than it was a few months ago.
The Trump administration announced last Friday that it would be exempting electronics such as smartphones and laptops from tariffs. However, a few weeks later, they said the exemptions were only temporary.
In April, amid a lot of uncertainty, U.S. Consumer Sentiment plunged, marking the fourth consecutive monthly drop. This was a sign of apparent disapproval for Trump’s trade conflicts, which have fuelled anxiety about possible job losses and rising inflation.
The University of Michigan released a preliminary reading of its closely-watched consumer sentiment index on Friday. It fell 11% monthly to 50.8. This is the lowest level since the COVID-19 pandemic. Over the last year, confidence dropped by 34%.
Analysts believe that big retailers are better positioned to handle the situation than smaller retailers, who lack the power to absorb additional costs or to pressure their suppliers. It also depends on what they sell and if their goods are sourced from abroad.
Ashley Hetrick is the principal and segment leader of the sourcing and supply chains at BDO. She noted that retailers are waiting to see what happens before ordering and are cautious when ordering seasonal products because they are less durable. She stated that cancellations of orders have not been widespread.
Walmart executives expressed confidence in their ability to deliver low prices despite Trump’s trade war with China.
The nation’s biggest retailer, whose prices were competitive and attracted inflation-weary consumers, has told analysts it is still vulnerable to challenges. It also said that they are monitoring the fluctuating tariff situation. Analysts told the company that sales were volatile.
Walmart CEO Doug McMillon stated at an investor’s meeting that “while we’re not immune in the short-term, we’re positioned to be offensive.” “Nothing in the current environment affects our confidence in our business strategy or our business.”
Andy Jassy, the CEO of Amazon, said that the company was doing all it could to keep prices as low as possible for its customers. This included bringing in products early before the tariffs were imposed and negotiating directly with suppliers.
Jassy’s Andrew Sorkin told CNBC Thursday that the company’s network of third-party vendors will be forced to pass higher costs on to their sellers.
Jassy stated, “Depending on where you are, there isn’t a 50% margin to play with. I think they’ll pass on the cost.”
Jassy stated that he had not seen any significant change in consumer behaviour since Trump’s tariffs. While he does see that some consumers are stocking up in anticipation of price increases, he is not certain how widespread this behavior is.
According to Bloomreach, which tracks sales for more than 1,000 global brands, North American online revenue increased by 0.4% in the week ending March 31st compared to the first week in March. Sales increased by 6% from the week ending March 24 to the week ending March 31.
According to Bloomreach, online sales of apparel increased by 44.8% in the week ending March 31st compared to the first week of the month.
