May Retail Sales Fall as Tariffs Shake Consumer Confidence/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Retail sales in the U.S. dropped 0.9% in May, reversing a spring spending surge that preceded President Trump’s sweeping new tariffs. Car sales led the decline, with consumers reacting to price uncertainty. Some categories like online and clothing retail showed gains, but overall sentiment has cooled.
U.S. Retail Slide Quick Looks
- Sales down 0.9%: Steep drop follows March pre-tariff spending rush.
- Auto sales plunge: Cars down 3.5% as buyers rushed purchases earlier.
- Retail anxiety: Consumer confidence dips amid economic and tariff uncertainty.
- Selective spending: Online, furniture, and clothing sales rise modestly.
- Business impact: Companies like Picnic Time hit by 40% sales drop.
- Tariff toll mounts: Firms raise prices, cut hiring to offset costs.
May Retail Sales Fall as Tariffs Shake Consumer Confidence
Deep Look
Consumers Pull Back After Pre-Tariff Spending Rush
After surging in March to beat the clock on President Donald Trump’s sweeping import tariffs, U.S. retail sales dropped 0.9% in May, according to the Commerce Department.
This marks the second consecutive month of decline, following a 0.1% dip in April, as Americans adjusted to rising prices and market uncertainty.
The steepest decline came in automobile sales, which fell 3.5%. Shoppers had rushed to dealerships earlier this spring in anticipation of a 25% tariff on imported vehicles and car parts. Excluding autos, overall retail sales still slipped by 0.3%.
Mixed Retail Performance
While total sales fell, discretionary spending in select areas remained resilient.
A key metric that excludes gas, cars, and restaurants—often viewed as a better indicator of core spending—rose 0.4% in May.
- Online retailers: +0.9%
- Clothing stores: +0.8%
- Furniture outlets: +1.2%
However, several sectors posted sharp drops:
- Home and garden centers: –2.7%
- Electronics/appliances: –0.6%
- Grocery stores: –0.7%
- Restaurants and bars: –0.9%, following a previous 0.8% gain
Tariff Impact Ripple Effect
Trump’s tariff policy, which expanded to nearly all imports, has caused a ripple effect through supply chains and pricing structures. Retailers stocked up heavily in spring, bracing for potential price hikes, but are now struggling with excess inventory and hesitant consumers.
Activity at the Port of Los Angeles has sharply declined, reflecting reduced import traffic, and businesses across sectors are feeling the strain.
Case Study: Picnic Time’s Revenue Drop
Picnic Time, Inc., a California-based company producing picnic baskets, coolers, and portable chairs, saw orders drop 40% this summer compared to last year.
CEO Paul Cosaro explained that many clients—including Target and Williams-Sonoma—either canceled or reduced orders, citing price uncertainty.
With 80% of Picnic Time’s inventory made in China, the company had to raise prices by 11–14% to compensate for rising costs.
As a result:
- Hiring freeze implemented
- Tariff bill for 2025 already $1 million, up from $333,000 in 2024
- Retail partners hesitant to commit to new stock
Outlook: Mixed Signals
Despite declining sales and confidence, inflation has cooled and unemployment remains low, creating hope for a possible rebound in consumer spending later in 2025.
Still, economists warn that continued uncertainty around trade and tariffs could suppress long-term growth in key retail sectors.
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