Economic challenges like tariffs and inflation push households to rethink their spending and saving habits. For example, in anticipation of tariff-induced price hikes, 72% of consumers are already adjusting their spending, such as switching to discount retailers like Aldi and Costco, buying private-label goods, or delaying major purchases like cars and electronics. Similarly, grocery shoppers are adapting by shopping more frequently but spending less per trip, or shifting their spending to value-oriented stores, as seen in a 1.2% year-over-year increase in spending at value grocers compared to a 1.4% drop at premium stores.
Most buying behaviors reflect how consumers must balance the price, quality, and necessity of a certain product or bundle of goods, however external factors like tariffs and inflation further shape these choices. Tariffs are expected to raise prices on imported goods, prompting consumers to stock up before increases or opt for cheaper alternatives. Inflation has already driven grocery prices up nearly 30% since 2019, with items like eggs rising 15% in January alone. Lower-income households, where groceries consume 23% of post-tax income, are particularly affected, often trading down to cheaper options or spreading out purchases. Meanwhile, higher-income households have been benefitting from wage growth (up 3.5% year-over-year in February) and rising values of their financial assets, which create a “wealth effect” that supports their spending. These disparities highlight how external pressures impact different income groups.
The impact of these external factors on consumers is further affected by the actions of the suppliers. For instance, brands like Walmart and Chipotle have pledged to absorb some price increases, while Ford offers employee discounts to all car buyers. These efforts help ease consumer anxiety and foster customer loyalty to certain brands. It remains to be seen if domestic producers will use the tariffs on imported goods as an opportunity to also raise their own prices, or if they instead focus on increasing their market share by keeping their own prices relatively low. Consumers will need to navigate these supplier choices and their own uncertainty as they try to balance their financial priorities.
Discussion Questions:
- Based on the blog post, how do external factors like tariffs and inflation influence consumer decisions beyond their income levels? Provide specific examples from the text to support your answer.
- The blog mentions that lower-income households spend a larger share of their income on groceries and often trade down to cheaper alternatives. How do these adjustments reflect their ability to adapt to rising costs?
Sources| Forbes: https://www.forbes.com/sites/pamdanziger/2025/04/08/american-consumers-are-resilient-ready-to-adapt-to-tariff-driven-price-increases; Bank of America: https://institute.bankofamerica.com/content/dam/economic-insights/consumer-checkpoint-march-2025.pdf; Unsplash: Photo by SumUp on Unsplash