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May 2, 2025
Will Retailers See a Summer Sales Slump This Year Due to Tariffs and a Weak US Dollar?
It could be a bumpy summer concerning retail sales figures, according to Modern Retail. The combined forces of ongoing tariffs, market uncertainty, and a weakening U.S. dollar could keep American consumers at home, rather than out spending their hard-earned cash.
Citing March data from KPMG, the outlet’s Mitchell Parton indicated that of the 1,500 individuals surveyed, three-fifths (60%) have begun to track their spending more carefully. The majority of those polled also indicated that they expect a recession to take shape over the course of the next year. About 16% of respondents suggested that they were set to increase their discretionary spending this summer — that is, on categories like restaurants, clothing, and entertainment — a result that was down two points from the same reading in 2024.
Parton went on to detail a second study pointing toward similar results.
“In a separate study, performance marketing firm Wunderkind surveyed 300 U.S. consumers and found 37% of them plan to reduce spending during the summer and holidays. Thirty-two percent of those consumers said they plan to focus on buying essentials, and 42% said they’re hunting for discounts,” he wrote.
A Weakened US Dollar Could Hamper Summer Spending
As Business Insider noted, a severely weakened U.S. dollar (down by about 8% this year so far versus competing global currencies as of April 24) could also lead to a curtailing of summer spending for many Americans.
While one obvious outcome of a drooping dollar is that purchasing power for those traveling abroad is hampered, analysts also warn that domestic shopping could take a hit as well, pressured by persistent inflation, rising tariffs, and the added strain of currency devaluation.
“Many U.S. households are still dealing with lingering higher prices after a run-up in inflation a few years ago, said Rob Williams, the managing director of financial planning and wealth management research at Charles Schwab,” Business Insider’s Alex Bitter wrote.
After pointing out that rising prices could further stymie the buying patterns of Americans, particularly lower-income Americans, Bitter moved to quote Williams again.
“The weaker dollar simply buys less,” Williams said.
Money writer Martha C. White reinforced this view in simple terms.
“Tariffs are already projected to add $3,800 to the average family’s costs this year, according to one estimate. A weak dollar compounds this impact. And unlike tariffs, which can have carve-outs or exclusions, the impact of a weaker dollar hits across the board,” she wrote.
Discussion Questions
Will retail sales trend downward over the summer of 2025 versus year-ago levels? Why or why not?
Are analysts being overly pessimistic about the prospect of a summer sales slump? Will American consumers continue to spend cash (or via credit) despite predictions?
Which retailers are best positioned to see a summer sales surge this year, or at least maintain their momentum? Conversely, which brands could be in trouble as spring comes to an end?
Poll
Loading …BrainTrust
Anil Patel
Founder & CEO, HotWax Commerce
Clay Parnell
President and Managing Partner
Dick Seesel
Principal, Retailing In Focus LLC
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Tariffs are disrupting the economy and, if left in place, will diminish demand from a number of sources. Tourist demand looks set to be hit, and that will impact cities and other destinations for overseas visitors. Domestic demand will also be down – however, this may not completely show in the retail sales numbers as prices will increase and will flatter growth. However, underlying volumes will swing negative and that will be punishing for retailers and margins.
Perhaps the question really should be should Americans continue to spend? If such entails taking out a loan to buy groceries, dare I suggest the answer should be “no”?
If interest rates are held at current levels, not reduced by summer, and significant trade deals aren’t soon made with other countries, namely in Asia, it could spell for rough retail performance. Consumers need some good news soon to feel confident about opening up the wallet. Otherwise we’re headed for a summer of more staycations, flat or less spending on clothing, trading down in restaurants, demand for greater deals in fresh food shopping. If you’re an upscale retailer, grocer or restaurant, better start planning now for promotional deals and showing customers how they can realize savings, find value.
There is plenty of noise around pending deals, but so far it’s just talk. What might cause an uptick (instead of a downturn) is the prospect of shortages and higher prices later in the year. This might actually bring a short-term bump in demand, not unlike the crowds in grocery stores at the start of the pandemic.
If products aren’t available in this country, they can’t be sold, and sales will decrease. We’re already seeing layoffs in the transportation and shipping sectors, and retailers are canceling orders. By the end of the summer, expect some real hand-wringing.
With all due respect to our friend Chicken Little,” I don’t believe tariffs will be as much a factor as advertised. But let’s take a closer look.
Consumer spending behavior often becomes more cautious during uncertain economic times, with individuals prioritizing essential purchases over discretionary purchases.
In spite of this, some consumers may continue to spend, owing to factors such as pent up demand, promotional offers, or a desire to maintain normalcy.
Moreover, credit can provide a temporary cushion, enabling consumers to maintain their spending levels despite uncertain economic conditions.
So, the first-quarter decline in the economy was Biden’s fault. As the economy declines in the next several quarters, whose fault will it be? GDP is defined by the following formula: GDP = Consumption + Investment + Government Spending + Net Exports. Which piece of the equation will not be negative?
While short-term fluctuations like a summer sales dip can seem concerning, this could actually be a prime opportunity for agile retailers to reset and recalibrate. A softer season allows space to test fresh engagement strategies—hyper-personalized promotions, localized assortments, or even smarter markdowns using AI tools.Additionally, we’re seeing consumers still willing to spend, but with more scrutiny—this signals a shift toward value-driven purchases, not a complete pullback. Retailers that can clearly communicate value, purpose, and relevance will emerge stronger.
Given the recent direction (and uncertainty) around tariffs and trade, many retailers and brands have been pulling back on purchasing and importing. This will impact volumes and assortments across many categories. The impact on inventory along with tariff implications for costs/pricing, as well as overall consumer sentiment, will push retail sales to be on a negative trajectory compared to last year and to early 2025 projections.
Consumer spending will be prioritized to essentials over discretionary purchases, and discount and value retailers will be in a better position versus other retailers. Retailers and brands that are able to show flexibility in how they are managing their assortment, pricing/promotions, and overall consumer engagement will be in better shape, but overall most retailers will be generally conservative in their outlook for the balance of this year.
Summer spending may slow due to tariffs, inflation, and a weaker dollar, but the solution lies in planning smarter, not pulling back. While retailers cannot control external factors, they can control how they respond. By focusing on everyday value rather than excessive discounts, they can protect margins. Offering localized assortments and simple, practical bundles can make stores feel more relevant without overwhelming customers.
Loyalty programs should go beyond points and perks, offering meaningful incentives that encourage repeat visits. Instead of pursuing volume-based promotions, retailers can design smaller, more targeted campaigns that align with what consumers truly need.
This is a time for calm and strategic planning. While consumers may hesitate, they will not vanish. Retailers who remain grounded in the current needs and mindset of shoppers will carry their momentum into the future.
We are already experiencing a downward trend due to tariffs, the economy, and the stock market. Customers are nervous and don’t know what to expect. Retailers are hedging their bets, and trying to find the balance of an increased price that is, in some cases, being set because of uncertainty in the near future. The White House is still making deals with the rest of the world related to imports and exports. Until this becomes consistent and predictable, we will be in this state of flux.
A key indicator of real economic activity among mid and lower-tier consumers, in my opinion, is loan delinquency rates. As more people borrow to make ends meet, and more of those loans fall into delinquency, we have a very real problem brewing. The trends there should be concerning, and we haven’t yet experienced the full impact of these import taxes. Across all sectors; mortgages, auto loans, and credit cards are setting significant upticks in delinquency rates. Work folks are having trouble making ends meet. And, when that happens, naturally, they’re going to cut back on spending. That should be a significant concern for retailers. They should be developing plans for value-forward marketing and assortments.
“The sky is falling,” said Chicken Little. I actually think a better business strategy is to continue to refine business practices and adjust to the demands of the day. In other words, the hard truth is that nobody knows what is going to happen this summer. Many will pontificate about a doomsday scenario, while still others will proclaim over-reaction and smooth sailing ahead. Both may be right.
My suggestion is to use this opportunity to accomplish four things that will protect profits and continue to satisfy shoppers:
Retailers that can manage inventory effectively, communicate value, and remain responsive to shopper needs will thrive and potentially see a bump this summer.
It’s great that lots of consumers were polled about their outlook on spending. Did anybody think about polling an occasional harbor master or trucking firm about the amount of inventory that is not on the way to retailers shelves? Harbor masters are not exactly a jolly lot these days. And if it all got resolved tomorrow, there is now a nice big hole in the time/action calendar for order placement, factory production, and shipping. And it’s not all going to get resolved tomorrow. So in addition to demand issues, there will be some supply issues also. Demand issues + supply issues = bumpy road = slump. It’s only a question of starting when, how deep, and how long.
Compared to last summer, consumer sentiment is down among U.S. consumers. Although the U.S. dollar has weakened, it’s still high enough to represent a trade barrier. The high U.S. dollar, tariff threats and annexation rhetoric have inspired many Canadians to reallocate their Summer 2025 travel budgets to domestic and European destinations. U.S. retailers are already noticing a dent in sales due to fewer foreign shoppers.