Tariffs Lead to Steepest Retail Sales Drop in 2025

U.S. retail sales fell by 0.9% in May 2025, marking the steepest monthly decline since January and following a 0.1% drop in April. The sharpest decreases occurred in car sales (down 3.5%) and building materials, reflecting the end of pre-tariff stockpiling in anticipation of Trump administration tariffs. Discretionary spending categories such as restaurants also contracted, though sectors like furniture, clothing, and sporting goods saw gains. Despite these setbacks, annual retail sales were up 3.3%, supported by steady job growth and wage gains. Inflation remained moderate, but companies including Walmart and Target signaled potential price hikes due to tariffs, while some retailers cited financial distress linked to trade policy volatility. Retailers and analysts warn that ongoing tariff and macroeconomic uncertainty may continue to weigh on consumer sentiment and discretionary spending through the summer.