Impact Uncertainty from New Tariffs Shakes U.S. Retail Industry
Although the wave of new “Liberation Day” tariffs announced by the White House on April 2, 2025, is part of President Trump’s agenda to “Make America Great Again” in a bid to boost U.S. manufacturing, it has created a cloud of economic uncertainty across the nation. The recent press release by The Conference Board indicated that for the fourth consecutive month, consumer confidence declined, causing the Consumer Confidence Index to fall 7.2 points in March to 92.9 (1985=100), while the Present Situation Index — based on consumers’ assessment of current business and labor market conditions — decreased moderately by 3.6 points to 134.5. However, in contrast, the Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — dropped sharply by 9.6 points to 65.2 — the lowest level in 12 years and well below the threshold of 80 that usually signals a recession ahead. Although potentially short-term until readjusting, reactions to the tariff announcement by the stock market resulted in a combined loss of $2.4 trillion in market value of S&P 500 companies and a nearly 1,700 point drop of the Dow Jones Industrial Average, as investors “scrambled for safe-haven assets to buffer against fallout,” following the “unexpected size and scope of the tariffs,” which “exceeded even some of the most bearish forecasts.”
Another market expected to be “dramatically disrupted” is the U.S retail industry, a major user of commercial real estate. Currently the availability of U.S. retail space remains close to the historic low of 4.2% according to online listing platform Costar. The current tight conditions are primarily being fueled by the limited amount of new retail construction in recent years causing the pace at which vacant high-quality space is backfilled to escalate. Although it remains too early to determine the full impact of the tariffs, some retail chains conceded that consumers would bear the brunt of the anticipated rise in costs. Major trade group the National Retail Federation (NRF) expects “the growth of U.S. retail sales to slow down this year, to 2.7% and 3.7% over 2024, with a sales volume between $5.42 trillion and $5.48 trillion, because of inflation and consumers’ anxiety over tariffs.” While tariffs have always been necessary to deal with for any company that imports, the magnitude of the impact of the higher than anticipated rates on some tariffs, which a report by UBS research states “Trump is probably using tariffs as ‘bargaining chips ….. likely to be toned down,” will depend on how long the new rates remain in place.