Trump tariffs could add $40 billion to holiday shoppers' and sellers' costs, LendingTree warns

LendingTree estimates that President Trump's tariffs will increase total holiday season costs by $40.6 billion, with consumers shouldering $28.6 billion, or an average of $132 per shopper, and retailers absorbing the remaining $12 billion. This added financial burden is projected to prompt consumers to reduce gift-giving or incur more debt, potentially leading to lower retail sales volumes and pressure on margins, particularly impacting categories such as electronics ($186 per shopper) and clothing/accessories ($82 per shopper).

Analysis

LendingTree projects President Trump's tariffs will impose an additional $40.6 billion in costs on the upcoming winter holiday season, with consumers bearing $28.6 billion, or approximately $132 per shopper, and retailers absorbing the remaining $12 billion. This analysis, based on 2024 spending data, highlights the direct financial burden stemming from tariffs announced six months prior. Prices for select food and consumer goods have already risen, with holiday items now hitting shelves reflecting these higher costs.
Retail analysts and LendingTree's chief consumer finance analyst Matt Schulz anticipate that the estimated $132 per shopper increase will significantly impact consumer behavior, potentially forcing a reduction in gift-giving or an increase in consumer debt. Categories such as electronics are expected to see the largest hit, with an average extra cost of $186 per shopper, followed by clothing and accessories at $82.

Retailers are anticipated to face pressure from both absorbing a portion of these costs and a potential reduction in sales volumes as consumers adjust spending habits. This scenario suggests a challenging holiday season for the retail sector, particularly for companies heavily reliant on discretionary purchases or those with limited pricing power. The broader economic implications point to constrained consumer demand and potential inflationary pressures on household budgets.

Key Decisions for Investors

• Investors should closely monitor consumer discretionary spending indicators and retail sector earnings for signs of demand elasticity and margin compression.
• Evaluate individual retailers' inventory levels and pricing strategies to assess their ability to navigate increased input costs and potentially reduced consumer spending.
• Consider re-evaluating exposure to highly discretionary retail segments, particularly those heavily impacted by tariff-driven price increases like electronics and apparel.