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August 4, 2025
Will Tariffs Derail Consumer Electronics Sales Recovery?
Citing signs of consumers trading down, Circana reduced its forecast for consumer electronics sales for the year to a gain of 1% from 1.6% previously.
In January, the Consumer Technology Association (CTA) predicted hardware sales would grow 2.6% in 2025, building on its estimated 1.1% gain in 2024 that followed two years of declines. The gains were expected to be driven by lower prices on TVs, wireless earbuds and gaming hardware, as well as AI-driven innovation in computers and other gadgets. CTA still warned that proposed tariffs could lead to significant declines.
In the first half through June, consumer technology retail dollar sales grew 1.5%, according to Circana, which tracks point-of-sale (POS) data. The increase was boosted by early pull-forward purchasing in the months of March and April, but consumers pulled back in the ensuing two months.
“Technology came to the forefront of consumer purchase decisions early in the year, with a big emphasis on IT products as the PC market is entering a refresh cycle,” said Paul Gagnon, VP and technology industry advisor for Circana. “However, that early boost is likely to weigh negatively on the second half as the trade-down behavior seen already from cost-conscious consumers in some product categories expands its reach.”
The first-half gains were driven by notebook and desktop PCs while newness supported sizeable gains in a few small categories, including smart glasses and rings as well as retro-influenced digital point-and-shoot cameras. In the television category, demand for lower-priced alternatives resulted in a 2% increase in unit volume, but 3% decline in dollar sales.
For the second half, Circana expects computers to see growth. Dollar sales of televisions 75 inches and larger are expected to grow by a double-digit rate as home-entertainment spaces are upgraded, but overall TV sales are expected to decline due to a slowdown in smaller sizes. Products like soundbars and smartwatches are expected to decline due to softer demand and a broader spending pullback.
“Economic uncertainty and persistent inflation will pressure consumer spending, but planned tech upgrade cycles are expected to underpin demand resiliency for many categories,” stated Gagnon. “The consumer will be more focused on affordability, even if it means trading down more frequently to offset any individual product price increases.”
Best Buy CEO Sees Sales Growth in Computers and Wearables, Gaming
On Best Buy’s first-quarter call on May 29, CEO Corie Barry forecast growth this year in computers, including tablets, supported by the end of Windows 10 product support in October — and innovation in the form of gradual improvement in AI-use cases and new AI features. She said mobile phone sales grew for the first time in three years with the benefit of investments by Verizon and AT&T in store labor. She also talked up the benefit of upcoming launches in gaming and the potential for Ray-Ban Meta glasses and other wearable AI products yet to be launched.
However, Best Buy lowered its annual outlook due to the tariff impact, with the retailer already raising prices on some products in May.
Barry said, “Customers continue to be deal focused and attracted to more predictable sales moments. We believe the consumer has remained resilient, while dealing with persistent inflation, making them value focused and thoughtful about big ticket purchases. We also still see a customer that is willing to spend on high price point products when they need to or when there is technology innovation.”
Discussion Questions
What’s your outlook for the consumer electronics category amid the tariff headwinds?
Are you seeing enough innovation to offset the pricing pressures?
Poll
Loading …BrainTrust
Neil Saunders
Managing Director, GlobalData
Bob Amster
Principal, Retail Technology Group
Shep Hyken
Chief Amazement Officer, Shepard Presentations, LLC
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Some of the electronics sales growth in the first half of the year was driven by pull-forward spending, as consumers anticipated the impact of tariffs on future prices. Their concerns are likely well-founded: electronics is one of the most tariff-sensitive categories due to its reliance on complex global supply chains, the specialized expertise required for manufacturing, and generally thin profit margins. As such, price increases are likely – and when they materialize, they will almost certainly weigh on demand and depress volumes.
We should know by Dec 31. Seriously, tho, I don’t think anyone will answer this with any confidence, as the magnitudes of the variables are completely unknown. So what would normally be a difficult task is essentially an impossible one.
That having been said, we can surmise a few things. Some electronics – i.e. phones – are relatively inexpensive, and seen as essentials more than discretionary items; the technology changes rapidly – or at least it appears to – so there are strong incentives for customers to keep upgrading. But for things like TV’s, wearables, waffle irons (to me personally a necessity, but not for everyone) I’m less optimistic: things could be fine…or not at all.
“Inexpensive” term may be getting more relative, as prices on essentials keep escalating. As student loans become more expensive, and 2026 medical insurance will be costing more $$. (The med insurance decisions are made during 4Q). An entry level iphone at $599 + tax (and pre monthly service cost) may become an issue… a gentrification issue.
Electronics are of two kinds, but both are sensitive to tariffs: one is a lower-priced commodity, the other a premium-priced product at the forefront of innovation. The former, with a thin profit margin buffer, is forced to pass tariff costs directly to consumers. Innovation not only offsets pricing pressures but also boosts demand, justifying premium pricing. Manufacturers compete in the commodity electronics space for volume, with compressed margins (due to tariffs), or invest heavily enough in innovation to justify higher prices, wider margins, and greater relevance.
This bifurcation makes retailer profitability more unpredictable, as they must allocate finite shelf space between the electronics assortment of “basics” (with predictable sell-through and efficiency focus) and “premium” (high-touch experiences with trend risk). Two different business models that can’t be optimized simultaneously without compromising both. For Best Buy, the answer is to double down on service and expertise. Tariffs are forcing the evolution of the business models necessary to address the bifurcation in the electronics market.
Chaos
Just attended the Audio Advice Live 2025 this weekend and it has now become the largest Home Theater convention in the U.S. On Saturday most of the demo rooms and lectures were over capacity. Interest seemed to be high this weekend for the mid price to premium products.
As electronics products suffer from tariffs, expect second-hand outfits like BackMarket.com to enjoy higher sales. Consumers are being squeezed (shopped for coffee recently?) and they will change their behavior in response to tariffs.
In a word, “troubling” is the way I would describe the impact of Tariffs on the Consumer Electronics business. Given that CE was the focus of my career for more than 25 years, I can confirm that price increases are not something that consumers are used to in the category. Technology, over time, generally drops in price and rarely goes up in price.
The average selling price for a television, for example, is less than half of what it was 10 years ago, and today’s products are of even better quality and better featured now than they were then.
Most CE large categories (TV, Computers, Smart Phones, Audio) are now mature businesses, with a strong installed base. They are effectively “replacement” categories rather than growth categories, and as such, CE was already struggling to produce growth in revenue Y-O-Y. Now, when you throw the tariff impact on top of an already challenging market situation, you only make it worse. Additionally, CE product is only produced in a few markets around the world, limiting the options retailers have to source products from new markets as they can within other product lines.
It will be a difficult year for CE and for CE retailers this year. I’m pulling for my former colleagues to be successful, but I’m not optimistic.
A resounding YES! It will take five to ten years for US industry to produce an equal product to that which we import now, at the same or lower prices as we had been importing C-E prior to the now-effective tariffs
Gee, Bob. I don’t disagree with you often, but…”It will take five to ten years for the U.S. industry to produce an equal product to that which we import now, at the same or lower prices as we had been importing. ” The U.S. will never be able to match the CE of China, Japan, South Korea, and now India. And,. It isn’t cheap labor. It is overall labor competence and numbers. U.S. manufacturing is not built for a CE future.
I guess you made my point and then, doubled down…! 🙂
Certain types of politicians, and most of the mainstream media, continue to ignore the amazing results tariffs are producing for America, because they prefer to continue on with negative “scare” language.
Innovation can lead to the development of more efficient processes and cost-saving technologies, allowing companies to maintain profitability despite pricing pressures. Additionally, it can result in the creation of new products or services that generate additional revenue streams. By staying ahead of the competition, businesses can differentiate themselves and justify higher prices.
It isn’t negative scare language. It is facts, history, and data. These tariffs are the most regressive tax in the last 100 years. Not good for the consumer. For the economy? We know how the Smoot-Hawley Tariff helped.
All the people being laid off in the Toy industry right now would like to have a word (two words, actually) with your argument. There are not any “amazing results” except for amazing inflation and amazing unemployment growth.
? can you define “amazing results tariffs are producing for America” in terms of REAL PEOPLE, mid to lower middle class?
$$$ is coming out of the pockets of Americans. Ultimately funneled to the WH to do whatever they please with. (zero transparency or accountability).
eg. I see Walmart raising the prices of milk and fruit, multiple times in 1H’25.
This is the start of wallets hemorrhaging…3.5 more years of whiplash/non strategy will come out of the WH. Consumer economic bifurcation is not going away.
USA is not broadly built for innovation in products. Services, yes.That is where the WH fails to steady their anger to foreign alliances. Tariffs focusing only on trade of products, and not the surpluses of services USA sells.
USA would need years to catch up to 2025 level of production of foreign products. Not including innovation. Are there enough Fortune 500 companies invested in 10 year capital investment that has already started? Are billions of $$$ locked in/already spent…. or are CSuites taking a more measured approach right now?
Not even an Etch A Sketch has been made in USA since 2000.
Continuing the toy theme…
“It’s important to note that the Mattel partnership with OpenAI focuses on the development and integration of AI technology into Mattel’s products, according to a CBS News article. The toys themselves will still be manufactured in various countries where Mattel has existing production facilities.”
Innovation that goes live, is based on logistics… which may/may not pan out.
While tariffs will increase prices, the increase will be only a small percentage. The prices of electronics won’t double. While consumers may notice, that won’t make brands less competitive. All retailers will be forced to increase prices. Just as “a rising tide lifts all boats,” a tariff will raise all retail pricing (the exception being the retailer who’s willing to lose money on the sale).
To lower income population, it may look like a completely unneeded (no legal ‘national emergency’) gentrification. Even if they keep their jobs, the pricing uplifts can leave them behind. Overall quality of life in USA drops.
Electronics and technology are deeply ingrained in our lives. People cannot live without them. People cannot live without upgrading them. Prices will surely increase. The maximum impact that we will see is a delay in replacement rather than an all-out rejection.
Consumers are aware of what is happening with tariffs and their ultimate effect on prices. It can be seen in the convoluted numbers across the first half of the year, with both shoppers and manufacturers shifting their buying habits in anticipation of the ongoing chaos.
But the reality is we need that new phone, that new television, that new laptop. The technological offerings of the latest, upgraded products are integrated into each subsequent and improved edition of the electronic product. The question for the consumer is not whether to buy or not, but how long can I stretch out the product I have before I replace it?
“NEW” may not be necessity.
Yes, in cases of PC computers that cant handle Windows 11 (by Oct deadline).
But for a TV (or the “need” for multiple TVs in a home), not so much
I’m surprised Ebay is not out front with tactical campaigns (right now) to gain back market share. My guess is they keep waiting to 4th Qtr and then do top line branding. Branding is rather silly, when they have the 2 sided proposition… sell to make some $ and buy (New or Used) items on the global marketplace.
Gentrification (keeping up with the Jones’) normalizes that things have to be NEW, to be new to you. WWII and depression era both brought the normalization of ‘mend & make do’. Which way will BNPL shift society?
Tariffs create short-term friction, but I don’t see them derailing the category. The real pressure is coming from changing consumer habits, with many shoppers trading down unless there’s a clear innovation hook. There is some promising innovation, especially around AI and upgrade cycles, but it needs to be clearly tied to everyday value if it’s going to offset rising prices.