The Cost of U.S. Tariffs Has Been Fully Passed On to Consumers! Retail Giants Warn of a New Round of Price Increases

American consumers are facing renewed price pressures as major retailers report that import tariffs are increasingly being passed on through shelf pricing. Companies such as Walmart (WMT.US), Target (TGT.US), and Best Buy (BBY.US) have acknowledged that the impact of tariffs is becoming evident in the cost of everyday goods, including groceries, household essentials, and electronics. J.M. Smucker (SJM.US), which owns brands like Folgers, Dunkin’, and Café Bustelo, recently disclosed a 22 percent decline in U.S. coffee profits due to tariffs, indicating that further price increases are likely. Hormel Foods (HRL.US), known for products such as Spam and Skippy peanut butter, attributed its missed quarterly targets to rising commodity costs—a revelation that led to a 12 percent drop in its stock value.

Compounding the situation, a federal appeals court ruled by a 7–4 margin that the majority of global import tariffs enacted under President Trump exceed legal boundaries and are unconstitutional. Although the duties remain in place pending a Supreme Court appeal, the ruling has introduced further uncertainty regarding the future pricing of imported goods. Miki Drexler, former CEO of Gap Inc (GAP.US) and current chairman of Alex Mill, warned that the current environment has become increasingly difficult to navigate, noting that businesses are struggling to align product costs, retail pricing, and profit margins—and suggesting that more challenges may lie ahead.

Retail leaders have emphasized that restocking inventory at elevated cost levels will inevitably lead to additional price hikes. Walmart’s CEO stated that the company is committed to maintaining low prices for as long as feasible, but acknowledged that weekly cost pressures are intensifying as goods are replenished under new tariff conditions—a trend expected to continue through the third and fourth quarters. Retailers now face the challenge of deciding how much of the increased expense can be absorbed internally and how much must be passed on to consumers, whose purchasing behavior is increasingly shaped by income levels and price sensitivity.

Economists characterize the current environment as a K-shaped economy, where affluent households continue to spend while lower-income groups are disproportionately affected by inflation and tariffs. The University of Michigan’s consumer sentiment index for August declined nearly 6 percent from July and fell more than 14 percent compared to the previous year. Inflation expectations for the next 12 months rose from 4.5 percent to 4.8 percent, and perceptions of durable goods affordability reached a one-year low. Director Joanne Hsu noted that confidence has eroded across all demographic segments, underscoring widespread concern over rising costs.

This cautious outlook is reshaping consumer behavior across income brackets, with households becoming more selective in their purchases. Whirlpool (WHR.US) CEO Mark Beazley observed a shift toward more affordable alternatives, while Procter & Gamble (PG.US) CEO Jon Moeller reported a modest move within product lines toward budget-friendly options like Gain laundry detergent. Brett Ross, CEO of National Consumer Suppliers Company, described the trend as “substitutive consumption,” where shoppers are opting for lower-cost items—such as replacing Jo Malone candles with value alternatives—while continuing to seek branded goods at discount retailers including TJX Companies (TJX.US), Ross Stores (ROST.US), and Marshall’s.