Consumers and businesses alike report getting rattled by the back-and-forth, unable to plan ahead and unsure what to do next. — Bloomberg
ECONOMIC data just confirmed what anecdotal evidence had suggested: Consumers are rushing to make major purchases of cars, electronics and appliances in an attempt to get ahead of tariffs that could raise prices.
US retail sales surged 1.4% in March from the previous month, the biggest jump in more than two years.
Auto purchases led the advance with a 5.3% increase as buyers sought to dodge President Donald Trump’s 25% tariffs on finished vehicles, which he unveiled late in the month.
Categories like building materials, sporting goods and electronics that are often imported from China also rose.
The report from the Commerce Department, combined with comments from top bank executives this week about resilient consumers who are continuing to spend, backs up the idea that concern about tariffs helped spur a shopping frenzy that is boosting economic activity.
Consumer sentiment is hovering near the lowest on record in data going back to the 1950s, but you wouldn’t know it if you visited a car dealership or Walmart recently.
“Consumers are playing a bit of beat-the-clock with tariffs,” Wells Fargo economists Tim Quinlan and Shannon Grein said in a note.
“Once again, consumer spending is managing to avoid the gravitational pull of all the negative dynamics that might otherwise hold it back.”
The March data capture spending before Trump announced and subsequently paused high tariffs on nations across the world, and before he hiked levies on most Chinese goods to 145%. But the report offers insight on consumers’ mindset at a time of high uncertainty about future prices.
The rush to buy lifted US auto sales in March to the highest rate in almost four years.
Sales across Honda Motor Co’s brands climbed 13%, while Ford Motor Co’s retail business jumped 19%. Hyundai Motor Co notched its second-best month ever in March, and the strength has carried into April.
“We’ve been doing quite well recently,” Jose Munoz, chief executive officer of the South Korean automaker, said in an interview.
“April started very, very well for us. Many people are thinking I have to buy a car in the next few months, so let’s get it today because the prices may go up.”
Substantial costs
The 25% tariffs on auto imports will add substantial costs to vehicle production, with much of that passed along to consumers.
A report this month by research firm Anderson Economic Group estimated that the levies could add at least US$2,500 in new costs per vehicle at the lower end of the market to as much as US$20,000 for luxury imports.
Some automakers have sought to ease buyer anxiety.
Hyundai pledged to hold prices steady until June 2, while Ford and Jeep-maker Stellantis NV announced marketing programmes offering models at employee pricing.
Jacob Townsend, 32, started looking at new cars earlier this year partly in anticipation of tariffs and possible changes to tax credits on electric vehicles. He wasn’t in a hurry, but saw some good deals on leases and pulled the trigger in mid-March on a 2025 Kia Niro electric vehicle.
“I wasn’t banking on the fact that things were going to stay favourable for buyers,” Townsend, an accountant in the Indianapolis metro area, said in an interview.
Rushing shipments
Manufacturers that rely on imported materials and retailers have also been rushing shipments and purchases to avoid paying stiffer prices in coming months. Separate data on Wednesday showed factory output increased a solid 5.1% in the first quarter – the most since late 2021 – as many customers boosted orders before the brunt of the tariffs hikes went into place.
While the tariff threat is giving a temporary lift to some retailers, the gyrations and the prospect of a trade war with China have led businesses to put investment and hiring on ice.
Consumers and businesses alike report getting rattled by the back-and-forth, unable to plan ahead and unsure what to do next.
The outlook for hotels and airlines is uncertain, and international airport traffic has slumped as foreign tourists stay away.
Strong labour market
Yet while economists have increased the odds of the US falling into recession, the labour market has been holding strong and incomes have continued to rise. Those are the main factors that drive consumer spending, said Robert Frick, corporate economist with Navy Federal Credit Union.
Stephen Stanley, the chief economist at Santander US Capital Markets, said the details of the retail sales report – especially the upward revisions for prior months – will raise his tracking estimate for first-quarter gross domestic product.
“The consumer got off to a slow start to the year in January and February, but the March retail sales figures indicate that household spending was not as weak in the first quarter as it previously appeared,” Stanley said in a note.
The Atlanta Fed’s latest GDPNow forecast shows first-quarter real personal consumption rising at a solid 1.4% pace. Thanks to the strong retail sales report, real gross domestic product is now forecast to drop 0.1%, excluding the impact of gold imports, a much improved estimate compared with past weeks.
Michelle Bacharach, the 39-year-old founder of FindMine, an artificial intelligence-powered outfitting company, said she and her husband plan to purchase all the materials they need for a home renovation in the next 90 days and both decided to upgrade their phones sooner than they otherwise would have to get ahead of tariffs.
Temporary reprieve
While smartphones are currently exempted from some levies, Trump has pledged the reprieve is only temporary.
“It’s going to be a lot more inexpensive to do it now than if we wait until Apple raises the price,” she said. — Bloomberg
Mark Niquette and Augusta Saraiva write for Bloomberg. The views expressed here are the writers’ own.
