Consumers in the US are growing anxious about impending tariffs and heightened prices, casting a pall over rebounding spending forecasts in the market. Need proof that trade policy is on the mind of the average customer? #Tariffs are trending on TikTok.
On Monday, US President Donald Trump said that tariffs set to be imposed upon Canada and Mexico “will go forward”, after delaying them at the beginning of the month. This means that, come next week when the delay expires, the 25 per cent tariffs on the two American allies will be enacted. On Thursday, in a post on Truth Social, he also announced an additional 10 per cent tariff on goods from China, also to go into effect on 4 March.
Like brands, who have been monitoring the regulation closely, consumers are worried. Sixty-two per cent of consumers say they’re concerned that new government policies around tariffs and trade will make apparel more expensive, according to highlights from a forthcoming report by Thredup. Thirty per cent of consumers say worries about the economy impact how much they spend on apparel, while 51 per cent say higher prices due to inflation impact how much they spend on apparel.
“After years of inflation, [consumers] have run through their savings and stimulus dollars and are now using credit card debt to fund their lifestyles,” says Bea Chiem, retail and consumer managing director at finance intelligence firm S&P. “Recent weak consumer sentiment data points to a softening consumer worried about inflation.”
Consumer confidence declined by seven points to 98.3 on The Conference Board’s Consumer Confidence Index, the organisation reported on Tuesday morning, marking the largest monthly decline since August 2021. Stephanie Guichard, senior economist for global indicators at The Conference Board, put this partly down to the expected impact of tariffs (in addition to the recent jump in price of household staples). “There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019,” Guichard said in a statement. “Most notably, comments on the current administration and its policies dominated the responses.”
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Once tariffs are implemented, there’s little doubt that consumers will face higher retail prices. “Due to the retail markup, a $1 tariff increase could lead to a $1.50 to $2 retail price hike,” says Dr Sheng Lu, professor in the University of Delaware’s department of fashion and apparel studies.
To date, the impact on spending has been minimal. “I am sure that shoppers are a bit confused, but people don’t react to announcements. They react to tangible changes such as prices going up or shipping times becoming elongated,” Neil Saunders, managing director of Globaldata’s US retail division, told Vogue Business earlier this month. The tariff increase is likely to impact consumers in about two to three months, Lu agrees, as retailers have existing inventory that they purchased before the tariff increase. Plus, market competition forces retailers to raise prices gradually, rather than shock consumers, he adds.
As tariffs push prices up, consumer shopping habits are likely to shift. How much — and where — will they shop once these taxes kick into gear?
Alternative options
As consumers grow wary of price hikes, they’re likely to reallocate their fashion budgeting (if they plan to still spend at all), experts say. This bodes badly for full-price fashion brands, particularly those targeting aspirational consumers (while luxury brands are more likely to be insulated from impact, as high-wealth consumers continue to spend). Fast fashion, off-brand and secondhand retail, meanwhile, are each poised to benefit.
According to Thredup’s report, 59 per cent of consumers surveyed say if new government policies around tariffs and trade make apparel more expensive, they will seek more affordable options. This figure is highest among millennials, at 69 per cent. Secondhand shopping is most appealing to younger consumers whose budgets are limited — and who are more conscious of the environmental impact of apparel consumption, Lu says. Per the survey, the amount of their apparel budgets consumers are planning to spend on secondhand is higher among younger generations (Gen Zs and millennials), who say they’ll spend 46 per cent on secondhand (versus an average of 34 per cent).
There are countervailing forces at work, says Thredup CEO James Reinhart. “On the one hand, consumers are saying, ‘I expect tariffs will make my life more expensive,’” he flags. “That could ultimately be great for secondhand.” When consumers are squeezed, they make smarter choices that focus on value, he explains, framing a shift to secondhand as a “nice potential tailwind” of tariff disruption on consumer spending.
Reinhart believes that, if tariffs — and the closing of the de minimis loophole — make ultra-fast fashion products more expensive, this could drive consumers towards secondhand. “If it’s more expensive for the Sheins and the Temus and the fast fashion companies, it makes your chief competitors more expensive and it also makes your products seem like a better deal,” he explains.
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But even if the de minimis loophole is closed, fast fashion will remain a tempting alternative for consumers, as it is still likely to be comparatively cheaper to already pricier alternatives. Plus, losing the loophole benefit will likely push ultra-fast fashion retailers to adapt their business models to remain price competitive, Lu says, such as shifting their sourcing bases.
That said, the consumer’s increasing awareness of tariffs could present an opportunity to push for increased industry transparency regarding cost structure — the price the consumer paid, how much covered the materials, how much workers were compensated and how much was collected as tariffs. This could turn people off fast fashion, suggests Lu, or at least give consumers pause.
Off-price will be another winner, experts agree. Because these tend to source domestically, purchasing excess inventory from other retailers, they’re relatively insulated from any tariff impact, says S&P’s Chiem. “These retailers could benefit if retailers and brands forward-buy too much inventory in advance of anticipated tariffs and need to offload excess inventory at a discount,” she says, referring to stockpiling, one measure retailers have taken in recent months as tariffs loom. “Historically, they also benefit from offering value when prices are high and consumers trade-in.” Still, off-price inventory remains limited in size and colour ranges, which can be a turn off.
To avoid losing out to these cheaper channels, brands must optimise value. It’s a sentiment that harkens back to larger conversations in the luxury space, where insiders and consumers alike are raising questions about value for money amid unjustifiably high price hikes. Here, the solve is similar: offer products at a range of prices that different strata of consumers can access. “Brands will need to offer product assortments at various price points — good, better, best — to cater to consumers at different income levels,” Chiem says.
After all, tariff anxiety is just one part of a wider puzzle. “If we’re uncertain about where [interest] rates are headed; how tariffs are going to [manifest]; what the economy is going to look like 12 months from now; what the job market will look like 12 months now — that generally makes us all spend less,” Reinhart says. “What young people are wrestling with right now is uncertainty across a number of domains, of which tariffs are just one piece of the bigger picture.”
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