Retailers across the US are warning of a cascade of price increases and product shortages as early as this month as a result of Donald Trump’s tariffs.
Some stores are preparing to raise prices within two weeks as the threat of tariffs of up to 125 per cent raise their costs, according to the Budget Lab at Yale University, worsening persistent inflation that has already forced many shoppers to limit their spending.
Even after the US president announced a 90-day pause on additional tariffs on Wednesday, the remaining 10 per cent blanket levy on most imports will raise prices 2.9 per cent overall, costing the average household $4,700 each year, the policy research centre estimates.
“That’s almost 18 months of normal inflation happening in very short order,” said Ernie Tedeschi, economics director at the Budget Lab.
Though the threat of tariffs has roiled Wall Street for days, the worst is yet to come for Main Street. The first changes would be on the produce aisle, where price increases would begin before the end of the month, Tedeschi said. The US imports 59 per cent of the fresh fruit and 35 per cent of the vegetables Americans consume, according to the agriculture department.
Walmart this week said there were likely to be “price impacts” from the tariffs, but chief executive Doug McMillon said the biggest US retailer sought to keep them as low as possible, including by managing the basket of products that it sells.
Kent International, one of the biggest US bicycle manufacturers, said prices across the industry would rise as much as 50 per cent unless Trump lowered the tariffs.
Retailers stocked up on inventory late last year fearing that tariffs and a labour strike at east coast ports could hit supply chains. Aside from perishable goods, most already have enough inventory to carry them through much of summer, according to Jonathan Gold, a vice-president at the National Retail Federation trade group. That means that shoppers will probably not see impacts on the clothing and toy aisles until they start back-to-school shopping in the fall.
“With retailers operating on slim profit margins of 2-3 per cent, there is not much give, unfortunately,” Gold said. “They will try to protect consumers as best they can, but I think there needs to be the realisation that unfortunately some of these costs are going to have to be passed along.”
Some consumers have begun to stockpile items ahead of the forecasted price increases, a move Tedeschi said would only raise them faster.
At a Target store in lower Manhattan on Wednesday afternoon, shelves that normally held bottled water, paper towels and flour were empty. Employees said that while they had more inventory in the back of the store, customers were hastily purchasing non-perishable items faster than they could restock them.
“Stuff is selling fast,” said one employee, who asked that their name be withheld because they were not authorised to speak publicly about the store’s operations.
Wine sales are also up as sellers warn that the tariffs will force them to stop carrying many imported small-production wines and raise prices on more popular bottles, said Tom Wark, executive director of the National Association of Wine Retailers.
“Consumers will absolutely lose access to some of the wines they like,” Wark said.
If Trump reinstated the “reciprocal tariffs”, a $30 bottle of European wine would cost as much as $50 within three weeks, Wark added.
Other business owners are still grappling with how to adapt to the levies.
“This is the point where you kind of just throw up your hands and wait and see,” said Joanne Kwong, president of Pearl River Mart, a New York City-based retailer that sells snacks, home goods, toys and other products imported from across Asia.
“[The tariffs] are not sustainable for a small business like ours or for many larger than ours. Ultimately, that cost will be borne by the consumer.”
Amrita Saigal, founder of nappy company Kudos, said her business would probably raise prices, but the tariffs uncertainty had made it impossible to plan. While Kudos manufactures its products in North Carolina and sources US cotton, certain packaging and components come from China.
“As much as we will try to absorb some portion of it, we will likely have to pass some of it on to the customer,” she said of the tariff cost. “It is not like this money is getting pocketed for us.”
“Even if I wanted to bring every component stateside, the infrastructure is not there” in the US, she said. Facilities to make the injection-moulded packaging, for example, did not exist in the US, she said.
Few items face price rises as steep as coffee, 80 per cent of which is imported, according to the US agriculture department. Only small swaths of Hawaii and California have the climate conducive to growing the beans.
Ben Fung, who owns a coffee shop called Créme on Manhattan’s Lower East Side, said his suppliers had already planned to raise prices as much as 30 per cent even before the tariffs went into effect after a drought in Brazil decimated harvests.
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Now, the tariffs threaten to swell the price of both the La Colombe coffee Fung brews and the paper cups he serves it in, which are manufactured in Canada. He hopes that the usual increase in business throughout the summer will allow him to hold the price of a latte at $5.50, but will reconsider in the fall.
“I don’t really like to pass the buck to my customers,” Fung said.
“I’m a mom and pop shop. I see the same faces. They become friends and family so I always feel bad when I raise prices. I’ll eat the cost until it’s not sustainable any more, but at the end of the day, I have to pay the bills.”
Additional reporting by Gregory Meyer and Patrick Temple-West in New York
