The Tariffs and Retail: Winners and Losers Emerge

It’s been only a few weeks since the Trump administration’s so-called “Liberation Day,” but the effects on the country’s retailers are already evident.

Earlier this month, President Donald Trump announced tariffs on nearly all U.S. trading partners and implemented a 10 percent baseline tax on imports from all countries. He was especially hard on China, ramping up tariffs on the country’s imports to 145 percent.

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Trump has since walked back the Chinese tariffs, saying on April 23 he plans to be “very nice” to China and bring import taxes down to between 50 and 65 percent, the Wall Street Journal reported. Trump also later excluded many electronics, including smartphones, from the tariffs on China, and other countries and products have gotten carve-outs, too.

His latest walkback on tariffs came after Trump met behind closed doors April 21 with the CEOs of major retailers, who warned his new import taxes could lead to empty shelves and higher prices at their stores, Bloomberg reported. (The initial April 2 “Liberation Day” tariffs announcement also caused a steep drop in stocks and a run in the bond market that is still sending shockwaves through the U.S. economy.) 

Still, unable to absorb the cost of increased tariffs, both small- and medium-size businesses “disproportionately affected” by the tariffs have had to jack up their prices, causing Americans to face a $3,800 tax increase per household, according to an estimate from the National Retail Federation (NRF).

“This is going to be game over for some businesses, because they’re just not going to be able to sustain this,” said Paul Schlader, co-founder and chief operating officer of New York City-based coffee chain Birch Coffee. “It feels like the direct opposite of what some individuals wanted when they were electing these officials.”

Besides passing along higher import costs to consumers, retailers have a few other options, according to experts: build up inventory as much as possible, source new suppliers closer to or within the U.S., or shut down.

“As far as actual cost, it’s going to be substantial, especially if you’re primarily sourced from China, where the lion’s share of the significant penalties reside,” said Brandon Svec, national director of U.S. retail analytics at CoStar.

“So, to the extent your supply chain is overexposed to Chinese markets, that’s where the greatest amount of threat is in the current environment,” Svec said. “And I think you’re just going to see a mix of higher prices, less inventory, and a desperate attempt to try and diversify those supply chains.”

In this new reality of tariffs, Svec said there are no “winners” per se, but there could be retailers who “lose less,” like large department store chains and grocery stores. And from a “loser’s perspective,” a lot of it is going to be goods-based companies that source products from overseas.

Retailers most vulnerable to the tariffs include footwear and apparel companies, fast-fashion retailers, electronics and appliances sellers, liquor stores and coffee chains, and furniture and toy sellers.

After the tariffs, a $40 toaster could cost consumers $48 to $52, a $50 pair of athletic shoes could jump to $59 to $64, and a $2,000 mattress and box spring set could set consumers back $2,128 to $2,109, according to the NRF. In addition, consumers are expected to pay $13.9 billion to $24 billion more for apparel and $6.4 billion to $10.9 billion more for household appliances.

And, for the two-thirds of Americans who drink coffee daily, your wallets are going to take a hit too.

Birch sources its green coffee beans from various parts of Central and South America, East Africa and Southeast Asia — in countries including Ethiopia, Kenya, Brazil, Colombia, Guatemala and Mexico — before roasting them in Queens, according to Schlader.

The chain already had to raise its prices in response to droughts in those countries and a major frost in Brazil. While the effects from the tariffs haven’t hit quite yet, Schlader said adding a minimum 10 percent tax on top of current wholesale prices is “very challenging” and will likely create a 10 to 40 percent cost increase across the board.

“There won’t be anyone in this industry that’s not going to be greatly impacted by this,” Schlader said. “As a small business owner, things like this that we have absolutely no control over, to say [they’re] frustrating is understating where we’re at.”

Joe Coffee, another New York City coffee chain that sources its coffee internationally, recently hiked prices for hot and iced coffee, as well as for its coffee beans, attributing the rise in cost to both “extreme market volatility” and the new tariffs, Amaris Gutierrez-Ray, the company’s vice president, wrote in a recent letter to customers.

Gutierrez-Ray said she expects a minimum 10 percent increase in costs across the board for Joe Coffee, as there’s “no way” the U.S. could “produce enough coffee domestically for our needs.”

The majority of the United States lacks the right conditions for growing coffee — including high altitude, cool to warm tropical climates and nutrient-rich soil — and so far only Hawaii and Puerto Rico produce green coffee beans at any scale, according to coffee news blog Sprudge. Dozens of coffee farms have started to crop up in California, while growers in Florida have started to experiment with cultivation recently, Sprudge reported.

When asked if an increase in domestic coffee production is possible, Schlader said “not at the scale it needs to be done.”

“In order to get full maturation out of a tree, and to get the ripest coffee, you’re looking at a three- to five-year cycle of growth,” Schlader said. “So, if this was possible, you’re looking at a three- to five-year period just to start the process, and you have no idea the level of quality that’s going to be yet. To call it a roll of the dice would be a bit of an understatement.”

The impacts on the coffee industry won’t be immediately noticeable — as containers that have already left their ports of origin won’t be taxed upon entry — but the next few months will be telling as new containers start coming in, Gutierrez-Ray wrote. And that doesn’t include the increased tariffs on paper cups, straws and other packaging materials that coffee chains rely on.

“The irony is that the money is not getting back to the producers’ pockets, but adding more constraints to all the businesses in the already unstable supply chains,” Gutierrez-Ray wrote.

In fact, the NRF said imports of all goods during the second half of 2025 will likely drop “dramatically” and lead to a total net decline of 15 percent or more in cargo volume throughout the rest of the year.

“It’s going to be about finding and locating new suppliers and trying to bring suppliers as close to the U.S. as possible,” Svec said. “But it takes time to develop and evolve those relationships.”

Plus, other countries’ faltering relationships with the U.S. as a result of the tariffs could further exacerbate the problem, according to Travis Terry, founder and CEO of consulting firm Immortal Strategies.

“I’m personally of the belief that, even if you took the tariffs off at this point, you’re still going to have damage to not just retail, but a lot of different industries, in large part because the brand of America has been hurt,” Terry said.

In countries where tariffs have been placed — including Canada and Mexico — there’s been an evident “boycott” of American products and a gross reduction in tourism, Terry said.

Tourism from Canada has seen a big dropoff since Trump implemented the new trade policies, with the number of visitors crossing the northern border decreasing 12.5 percent in February year-over-year and 18 percent in March, NBC News reported, citing data from the U.S. Customs and Border Protection. (It should be noted, too, that Trump has repeatedly said he wants to annex Canada to the U.S., and has otherwise threatened the longtime ally.)

As a result, small retailers that rely on tourism “are going to be hit pretty hard” by the tariffs, especially along popular New York City shopping corridors like Fifth Avenue or in SoHo, Terry said.

Those smaller retailers may also face threats of acquisition by larger companies if they can’t perform well.

“One of the more damaging consequences of these tariffs is the likely toll on small businesses,” Terry said. “Many may be forced to scale back or shutter operations entirely, leaving them ripe for acquisition by larger domestic or international conglomerates at discounted valuations.”

And real estate has already felt the brunt of the tariffs’ impacts.

Since construction materials shipped from overseas have also seen prices spike under Trump’s tariffs, there’s been a noticeable slowdown in new retail developments and shopping centers, and therefore a pullback on new leasing, according to Vasiliki Yiannoulis-Riva, a shareholder in the real estate practice at law firm Polsinelli.

“Right now, it’s literally dead,” Yiannoulis-Riva said about leasing. “People are holding off on leasing, and they’ve hit the pause button justifiably, because they know they’re about to take a big hit. It’s going to be bad all around for the real estate industry, not just for tenants, but for landlords too.”

And, while “there’s not going to be a lot of winners out of this,” Terry said, some retailers might actually fare better from the tariff situation.

As far as those so-called “winners” go, bigger discount stores such as Walmart and Target might be slightly less impacted due to their large size and diversified supply chain.

Last week, Walmart CEO Doug McMillon, Target CEO Brian Cornell and Home Depot CEO Ted Decker met with Trump to discuss the tariffs’ impact on their businesses, which largely rely on foreign imports.

Spokespeople for both Walmart and Target said the executives had a “productive meeting” with the president. But the meeting clearly had an impact on Trump, who announced the next day he would cut back on Chinese tariffs in an effort to keep American companies afloat and ease tensions with Beijing, the WSJ reported.

Going forward under the trade policies, McMillon said during an investor presentation earlier this month that Walmart will be “focused on keeping prices as low as we can” in the “clearly fluid environment.”

“History tells us when we lean into these periods of uncertainty, Walmart emerges on the other side with great share and a stronger business,” John David Rainey, executive vice president and chief financial officer at Walmart, added in a statement sent to Commercial Observer.

Walmart will likely perform well under the tariffs because of its consumables-based inventory — unlike discount chains such as dollar stores, which could become “unmarketable” in current conditions, according to Svec.

“The dollar stores rely on foreign goods and imported merchandise,” Svec said. “All of that is really going to become unmarketable. You can’t push 125 percent cost increases onto lower-income consumers. It’s just not going to play.

“[But] Walmart can definitely lay into their suppliers differently than maybe a mom-and-pop, third-party shipper or retailer will be able to,” Svec added. “So I think scale certainly is going to matter. Over half of [Walmart’s] sales come from consumables or food, so they’re going to be better insulated.”

In the same vein, grocery stores in the U.S. are expected to stay afloat under the tariffs because they sell a “pretty domestic basket of goods” as opposed to sourcing products from overseas, Svec said.

In fact, nearly 90 percent of U.S. consumers’ food and beverage spending was from domestically produced products in 2016 (the most recent data available), while the rest was from imported foods and wines, according to research from the U.S. Department of Agriculture.

However, that’s starting to change. From 2007 to 2023, the percentage of U.S. fresh fruit and vegetables supplied by imports increased from 50 percent to 59 percent for fresh fruit and from 20 percent to 35 percent for fresh vegetables, the USDA found.

And even if they’re not affected by tariffs, domestic food prices haven’t remained stable. Average annual food-at-home prices in the U.S. increased 1.2 percent in 2024 compared to 2023, largely due to an outbreak of avian influenza raising egg prices by 8.5 percent in 2024, according to the USDA.

Despite the increase in imports and higher produce prices, grocery stores are a staple of everyday life, so they’re likely going to do just fine under the tariffs (i.e. consumers will literally eat any higher prices — they have to).

“Grocers are actually going to be the winners, or at least those that are going to lose less in this environment,” Svec said. “The greater the necessity of your product, the less impacted you’re going to be.”

Another “winner” could be second-hand clothing stores, or thrift shops, because “they’re selling things that have already been used or worn,” and won’t have any tariffs attached, Yiannoulis-Riva said.

One other aspect of the tariffs that could benefit retailers is the removal of the de minimis exemption, which was a provision that allowed certain imports under $800 — typically small-value items from foreign-based fast-fashion retailers like Shein or Temu — to enter the U.S. free from added inspection or customs duties. That could slightly help dollar stores, as Shein and Temu have started to siphon their customer base.

“Shein and Temu were capturing so much of the market and eating so much of the cheap goods market that removing the de minimis [exemption] for those two in particular will help increase American competition from our own U.S. retailers,” Svec said.

However, a challenge retailers might not see coming is a change in consumer behavior.

Because of the tariffs, consumers are facing a higher cost of goods in most areas of retail. To soften the blow on their wallets, consumers might look to cut back on discretionary spending such as dining out, going to the movies, getting haircuts, or really any personal service.

“It’s going to cause [consumers] to shift behavior,” Yiannoulis-Riva said. “Instead of drinking French wine, you drink Napa wine.”

The tariffs are also hitting consumers at a time of general economic instability — credit card debt is skyrocketing, interest rates are still high, and home affordability is worsening.

In fact, low-income consumers are already spending less. Since the tariffs were announced, Walmart’s McMillon said customers are buying smaller pack sizes; McDonald’s saw low-income guest visits drop by a double-digit percentage during the fourth quarter of 2024; and Dollar General reported customers having only enough money for “basic essentials,” according to the WSJ.

“I’m more concerned about consumers right now than I am retailers,” Svec said. “I do worry that this is going to be the final nail in the coffin that makes them make some hard decisions around their spending. … It isn’t going to be good for the economy or retailers by extension.”

Isabelle Durso can be reached at idurso@commercialobserver.com.