Tariffs on imports from Canada and China are set to commence on Tuesday, while the Trump administration has granted a one-month extension for the 25% tariffs on Mexico.

With the situation rapidly evolving regarding the implementation of tariffs on imported products, consumers in the U.S. are worried and getting ready for the financial impact. Retailers, for their part, are working to strategize in advance of the imminent 25% tariffs on goods from Canada and Mexico, as well as a 10% on Chinese imports.

Tariffs have become a key concern for U.S. retailers

At a recent event in Washington, D.C., where prominent U.S. retailers were present, tariffs were a hot topic. By that time, President-elect Donald Trump’s proposed tariffs targeting China, Canada, and Mexico were already a well-known issue.

“We focused solely on this subject of tariffs,” stated Balika Sonthalia, a partner and leader of strategic operations for the Americas at the consulting firm Kearney, during an interview with YSL News.

She noted that alongside immigration policies, tariffs have retailers anxious. “The combination of these two factors can leave many sectors in a difficult position,” she explained. With Trump reiterating his commitment to implement tariffs and reaffirming his stance in early January after a Washington Post piece suggested a potential rollback, it was clear that U.S. retailers and consumers were preparing without delay.

Sonthalia mentioned that retailers are currently assessing “what exactly they are facing.” Her expertise at Kearney focuses on consumer goods and retail distribution.

What’s the latest scoop on Trump’s tariffs?

On his first full day in office, as reported by YSL News, Trump announced a blanket tariff of 25% on Mexico and Canada beginning February 1, unless those countries enhanced their border security. He alleged that both nations had significant issues with illegal migration and drug trafficking into the U.S. Additionally, he mentioned considering a 10% tariff on China.

Initially, the tariffs were set to kick in on Tuesday, February 4. However, an agreement was reached between Mexico and the U.S. on Monday morning, postponing the tariffs for one month and averting a potential trade conflict. Nonetheless, tariffs on imports from Canada and China were still expected to proceed as planned.

In a recent note, Morgan Stanley Economist Michael Gapen pointed out that tariffs might serve as a bargaining chip with Mexico as the revised U.S.-Mexico-Canada agreement is evaluated in the coming months.

“The President’s indication that tariffs on Mexico and Canada could materialize by February 1 reminds us to stay alert, as U.S. policy could shift rapidly,” Gapen commented.

He also suggested that the repercussions of tariffs would linger through 2025 and 2026, with the “tariff shock” expected to subside by the latter part of 2026.

‘Tariffs are just another variation of inflation’

According to estimates from Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation, tariffs could impose an additional annual cost of $2,500 to $7,600 per household.

Darpan Seth, CEO of Nextuple, a firm that aids in supplying products to major retailers like Dick’s Sporting Goods and luxury brands such as Kate Spade and Coach, stated that consumers will ultimately bear the costs of any imposed tariffs. “For consumers, tariffs resemble another form of inflation, just under a different name,” he explained. “They produce a similar effect of increasing prices.”

Some consumers may defer significant purchases or opt for less costly alternatives if prices rise for imported items, Seth noted. For instance, a consumer might choose to conduct a minor repair instead of replacing a larger, more expensive auto part.

Retailers affected by tariffs will have little choice but to raise their prices in the short term, according to Seth.

U.S. retailers express concerns over tariffs

Industry sources, including Gold, indicate that despite the Trump administration’s earlier tariff threats during his previous term – some of which were enacted – the current climate feels different.

Retailers represented by the National Retail Federation (NRF), which encompasses both large and small businesses, are deeply concerned, Gold stated.

“There’s an immense complexity and numerous challenges in the supply chain, and having substantial tariffs added is causing significant disruption as businesses scramble to determine their next steps,” Gold explained.

Given the variety of potential tariff scenarios being considered, retailers are striving to develop strategies to address them all.

What are the implications of tariffs for consumers?

A study by the NRF assessed the anticipated effects of tariffs on six categories of consumer products: clothing, toys, furniture, home appliances, footwear, and travel items.

Gold noted that retailers heavily depend on imported goods and components to provide a wide range of products to consumers. He clarified that a tariff is essentially a tax imposed on the U.S. importer, not on a foreign country or exporter.

The NRF pointed out that while some U.S. manufacturers might see benefits from the tariffs, any advantages for domestic producers and the government from tax revenues will not compensate for the overall detriments faced by consumers.

The NRF provided examples of possible price hikes due to tariffs:

◾ A toaster oven priced at $40 might rise to $48-$52.

◾ A pair of athletic shoes costing $50 could increase to $59-$64.

◾ A mattress and box spring set valued at $2,000 might end up costing between $2,128 and $2,190.

The increased prices and decreased purchasing power would particularly impact low-income families, the NRF stated in its November 4 study.

Gold added that while the NRF focused on six specific categories, he believes that consumer electronics, pet products, children’s goods, and groceries could also face significant price increases due to the proposed tariffs.

Nonetheless, there is a silver lining. Financial analysts previously told YSL News that the tariffs during Trump’s first term did not lead to “extremely high inflation.” The current administration stands firm on the advantages of tariffs.

“President Trump has pledged to implement tariff strategies that safeguard American workers against the unfair practices of foreign markets and companies,” Brian Hughes, spokesman for the Trump-Vance transition, asserted earlier this month. “As he did before, he will pursue economic and trade policies designed to make life more affordable and prosperous for Americans while ensuring a fairer competitive landscape for U.S. manufacturers.”

How are U.S. retailers responding and preparing for tariffs?

Some retailers are reconsidering their sourcing strategies, while others are putting contingency plans in place, according to Neil Saunders, a retail analyst at GlobalData.

The NRF’s retail members are striving to anticipate both best-case and worst-case scenarios, Gold commented.

Larger U.S. retailers have more options to modify their sourcing strategies, Gold noted, although such changes cannot be implemented overnight.Smaller local shops and mid-sized retailers face more challenges than larger corporations, according to Gold. He expressed concern that the tariffs might lead to some of these smaller retailers shutting down.

Recent trends indicate that both consumers and retailers are already adjusting to expected price hikes and tariffs. The Wall Street Journal reported that some retailers preemptively advertised products like electronics and appliances during Black Friday, alluding to possible price increases due to tariffs. Sales data from Black Friday and Cyber Monday showed a boost in purchases of these items.

Consumers will face rising prices

Gold pointed out that larger retailers are also cautioning that consumers could experience price increases as a consequence of tariffs. The timing of these price hikes will depend on how quickly the tariffs come into effect.

A Walmart spokesperson opted not to elaborate, but prior to the election, Walmart’s Chief Financial Officer John David Rainey mentioned in a CNBC interview that if President Trump’s suggested tariffs were implemented, the retailer might need to raise prices on certain products.

“Our strategy is to maintain everyday low prices,” he stated. “However, there are likely instances where prices will rise for consumers.”

In a December earnings call, Dollar Tree officials indicated that tariffs could force a rise in the prices of their products again. They also noted, as previously shared by YSL News, that proposed tariffs might alter the variety of products available at Dollar Tree.

Gap’s media relations team, which includes brands like Old Navy and Banana Republic, did not respond to inquiries for comment.

Sonthalia reported that retailers at a meeting in Washington expressed they might manage costs through efficiency and pricing tactics if tariffs stayed under 10%. If tariffs exceed this, however, the additional costs would likely be shifted to consumers.

Gold added that even without tariffs becoming a reality, “the mere anticipation is creating a bit of turmoil within the supply chain.” He also mentioned the risk of a port strike that was thankfully avoided earlier in January.

Some retailers believe the tariffs might just be a negotiating strategy from Trump.

Sonthalia, whose clientele ranges from Fortune 15 corporations to small independent retailers across various sectors—including food, pharmacy, electronics, and apparel—asserts that “the tariffs are definitely on their way.”

“It’s a matter of how significant they will be,” she concluded.

Consumers hesitant about higher prices for U.S.-made goods

According to Lauren Beitelspacher, a marketing professor at Babson College in Massachusetts, consumers are sensitive to prices and are reluctant to pay the higher costs that often come from producing many products in the U.S.

The high expenses associated with labor, production, and facility construction make U.S. manufacturing costly, she noted. Transitioning production back to America would result in prices surging, she warned.

“Consumers have specific price points in mind for what they’re willing to spend, and if something exceeds that, they start to reconsider whether they actually need it—especially for non-essential items,” Beitelspacher explained.

Additionally, the U.S. lacks access to some raw materials, like silk, which must be imported and can add to the overall costs, she pointed out.

She also foresees significant resistance from major U.S. retailers and influential industry lobbying groups in sectors like food, apparel, retail, and electronics regarding Trump’s plans.

Manufacturing adjustments take time

Gold highlighted that many retailers make their business plans six months to a year ahead, meaning they couldn’t afford to postpone decisions until Trump assumed office.

Despite this, retailers and suppliers learned during Trump’s previous term that they needed to be more agile with their supply chains, moving away from sole reliance on China. Gold described tariffs as a potential tool in trade discussions but emphasized they shouldn’t be the only mechanism.

In summary, Gold described the scenario as multifaceted and nuanced.

He further remarked, “It’s not straightforward to shift your supply chain. It requires months, if not years, of planning.”

Many major U.S. apparel and footwear companies Beitelspacher has spoke with are exploring alternative manufacturing sites in countries like Indonesia, which may remain unaffected by the tariffs for exports.

Relocating manufacturing might compromise quality

As businesses seek out different countries for manufacturing, it may affect the quality of consumer goods since these locations may have varying labor, safety, and quality standards, Beitelspacher warned.

On the flip side, Trump’s tariffs could inadvertently spark economic growth in some developing nations, she added.

However, she cautioned that overworked manufacturing plants in certain countries could outsource excess production to “unauthorized facilities,” unbeknownst to retailers. These facilities may lack oversight or proper labor regulations, potentially resulting in longer hours, inadequate environmental protections, low pay, and unsafe conditions for workers.

Beitelspacher warned, “This could lead to not just environmental concerns but also serious human rights issues.”

Betty Lin-Fisher is a consumer reporter. Follow her on X, Facebook, or Instagram @blinfisher.