US Tariffs Impact Holiday Prices and Consumer Choices

The imposition of tariffs by the United States government is influencing holiday shopping in unexpected ways, impacting prices and consumer spending habits across various sectors. Many retailers are grappling with increased costs for imported goods, which is causing consumers to rethink their holiday purchases. This shift is evident in stores like the Ah Louis Store in San Luis Obispo, California, where co-owner Emily Butler has noted a change in customer behavior this season.

Changing Consumer Behavior Amid Tariffs

Every holiday season, the Ah Louis Store transforms into a festive destination, adorned with garlands, nutcrackers, and a wide array of ornaments. However, Butler and her sister-business partner have found themselves working harder to convert visitors into buyers this year. The reason? Many of the holiday items they sell are imported, and the tariffs introduced by former President Donald Trump have led to higher prices and limited supply.

In an effort to adapt, the sisters have modified their inventory, focusing on more profitable items, such as nutcrackers and gift baskets. Butler remarked, “We’re definitely seeing more cautious spending this year,” noting that customers are opting for less expensive options, such as a $100 gift basket instead of a $150 one.

According to a recent poll from the Associated Press-NORC Center for Public Affairs Research, the majority of U.S. adults have observed rising prices for groceries, utilities, and holiday gifts. In November, a Gallup survey indicated that consumer confidence had dropped significantly, with gift budgets shrinking by an average of $229 from October to November, marking the largest decrease recorded at this stage of the holiday shopping season.

Uneven Effects Across Industries

The impact of tariffs has not been uniform across all sectors. For example, the toy industry has been particularly affected, as most toys sold in the U.S. are manufactured in China. The Toy Association reports that the tariff rate imposed on Chinese goods fluctuated dramatically, starting at 10%, peaking at 145%, and settling at 47%. This inconsistency has created uncertainty for toy retailers.

Dean Smith, co-owner of JaZams, independent toy stores in New Jersey, has witnessed price increases on approximately 80% of his inventory, with wholesale prices rising between 5% and 20%. A doll that cost $20 to $25 last year now retails for $30 to $35, making it challenging for families with limited incomes.

Consumer electronics, which are predominantly imported from China, have also seen price hikes. In 2023, China accounted for 78% of U.S. smartphone imports and 79% of laptop and tablet imports, according to the Consumer Technology Association. Best Buy has acknowledged raising prices due to tariffs, although CEO Corie Barry indicated that the company has diversified its product range to accommodate lower-income shoppers.

Holiday gift shoppers in the jewelry market may face higher prices as well, largely due to the rising cost of gold rather than tariffs. David Bonaparte, president and CEO of Jewelers of America, noted that tariffs on imported goods from countries like Switzerland and India have impacted prices. For instance, watches from Switzerland were subject to a 39% tariff until a recent agreement reduced it to 15%.

Retailers across the board are adjusting to these economic pressures. Jeremy Rice, co-owner of House, a home décor shop in Lexington, Kentucky, stated that tariffs have delayed production and increased prices on imported holiday decorations. Popular items like red berry stems have seen price increases from $8.95 to $10.95, reflecting the higher import costs.

For consumers seeking to avoid higher prices, John Harmon, managing director of technology research at Coresight Research, suggests exploring secondhand stores and discount retailers that stock inventory acquired before the new tariffs took effect. Joe Adamski, senior director at ProcureAbility, highlighted that domestically produced goods such as books, food, and beverages remain viable gift options.

The landscape of holiday shopping continues to evolve as consumers navigate rising prices and changing economic conditions. The full impact of tariffs may become clearer in the coming months, particularly if they remain in place beyond January 1.