Retailers Sound Alarm: ’We Haven’t Seen the Worst of Tariff Impacts Yet’

Brace for impact—retail's tariff nightmare is just getting started.

Supply Chain Shockwaves

Import costs skyrocket as new tariffs hit shelves. Retail margins evaporate faster than crypto gains in a bear market. Consumers face price hikes that make Wall Street bonuses look reasonable.

Inventory Crunch

Backorders stack up while warehouses sit half-empty. Seasonal goods arrive late—if they arrive at all. Holiday shopping? More like holiday scrambling.

The Domino Effect

Small retailers bleed first. Big boxes tighten belts. Everyone passes costs along until someone breaks. Free market purists suddenly discover the appeal of trade protections.

Retail's grim prophecy: higher prices, thinner selections, and economic pain that trickles up faster than it drips down. But hey—at least some hedge funds will short the sector profitably.

The rise of value shopping

That cautious mindset is now shaping how Americans shop, with households across the income spectrum becoming more selective about where and how they spend.

Whirlpool (WHR) CEO Marc Bitzer noted consumers are "choosing to mix into lower-end products," while Procter & Gamble (PG) chief Jon Moeller said he's seeing "modest trade-down within our branded portfolio" as shoppers opt for cheaper detergent lines like Gain.

Brett Rose, CEO of United National Consumer Suppliers, which works with retailers like Walmart, Macy's (M), TJX Companies (TJX), Dollar Tree (DLTR), Amazon (AMZN) resellers, and others, described the behavior as more "replacement" than pure trade-down.

"Instead of buying a Jo Malone candle, I'm going to buy a really great candle that's still priced right," Rose said of the consumer. "But I can walk into TJX, Ross, or Marshalls and really still find the brands at a lower price."

Read more: 5 ways to tariff-proof your finances

That dynamic has helped off-price retailers and discounters capture share.

Chains like Dollar Tree, Five Below (FIVE), and TJX Companies have all reported stronger demand in recent months as shoppers hunt for bargains. Shares of those companies have climbed about 45%, 37%, and 14%, respectively, since the start of the year.

Still, with tariffs reshaping prices and consumers shifting their habits, the path forward is far from clear.

As retail veteran Drexler said, "If people say that they have the answers, I wish they WOULD give me a call and tell me what they are."

Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at [email protected].