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The US retail sector is confronting a strategic challenge driven by proposed high tariffs and increasingly price-sensitive consumers, with the e-commerce market projected to lose hundreds of billions of dollars if current trade policies remain unchanged. A Statista study estimates that maintaining a high-tariff regime—such as the scenario proposed by Donald Trump—would reduce US e-commerce revenue by roughly US$320 billion (MX$5.8 trillion) by 2029 compared with a free-trade environment. Online sales are forecast to reach US$1.84 trillion by 2029 without tariff changes; under the high-tariff scenario, they would fall to US$1.52 trillion, a decline of nearly 17%.
The proposal includes steep increases in import duties, in some cases tripling the average rate and raising it to its highest level since 1969. While countries like China have negotiated targeted reductions—potentially lowering tariffs from a peak of 145% to 55% in specific categories—the broader policy would sharply increase costs on imports from Asia, Europe and Latin America.
Tariff Pressure Forces Supply Chain and Pricing Shifts
The heightened tariff burden is forcing structural changes across the retail value chain, particularly in import-heavy categories. The report warns that fashion would see its average tariff rise to 12.55%, compared with 1.83% on other imports. Other heavily impacted sectors include household goods, toys, lighting, low-cost electronics and footwear.
The strain is already raising costs: 76% of Amazon sellers and 71% of direct-to-consumer (D2C) brands report a higher cost of goods. More than six in ten surveyed companies expect to pass these increases on to consumers. In response, 44% of Amazon sellers are considering relocating production outside China.
The evolving supply chain landscape is also drawing regulatory scrutiny. US Trade Representative Jamieson Greer recently warned Canada and Mexico not to act as export platforms for countries such as China and Vietnam—something he suggested is already happening in parts of Mexico, Reuters reported.
Consumer Caution and Holiday Spending Trends
Retailers faced cautious spending during the key five-day Thanksgiving shopping period. Macy’s CEO described today’s shopper as “more choiceful,” noting that consumers “are more discerning about how and where they spend their dollars” amid persistent inflation.
Despite this caution, online holiday spending rose, driven mainly by higher-income consumers. However, underlying indicators point to growing fragility: consumers show limited tolerance for price increases above 5%, especially for non-essentials. Bank of America data shows household card spending rose just 0.2% in the week ending Nov. 29 compared to the same week in 2024. Shoppers reduced impulse buys at retailers like Target and Walmart, while use of buy-now-pay-later services hit record levels, according to Adobe.
“The low-end consumer has been joined by the high-end looking for bargains and has become more frugal and trading down,” said Jay Woods, chief market strategist, Freedom Capital Markets.
Retailer Responses and Mixed Results
Retailers are deploying varied strategies to counter economic pressures. Inditex, the world’s largest fast-fashion group, reported strong performance, with currency-adjusted sales up 10.6% in November and third-quarter revenue rising 8.4% to €9.8 billion (US$11.41 billion). The company preserved margins by closing smaller stores and expanding larger, high-productivity flagships, operating 5,528 stores worldwide as of Oct. 31, down from 5,667 a year earlier.
American Eagle leveraged influential marketing—such as its “Great Jeans” campaign featuring actress Sydney Sweeney—to lift demand. Its shares rose 15% after raising its annual comparable-sales forecast.