Shoppers Feel Pinch as Tariffs Impact Holiday Retail Season

The Ah Louis Store in San Luis Obispo, California, transforms into a dazzling winter wonderland each holiday season. Green garlands, towering nutcrackers, and festive decorations adorn the historic downtown building starting in early November, offering customers a selection of over 500 ornament varieties and holiday gift baskets.

“We really just make it a magical spot,” says co-owner Emily Butler. “Whether you come in or not, we want to make sure that we’re spreading that holiday joy.”

But this year, Butler and her twin sister-business partner faced greater challenges turning browsers into buyers. Many decorations and stocking stuffers they sell are imported, and either didn’t arrive or became more expensive due to the Trump administration’s substantial tariffs on foreign goods.

To adapt, the sisters shifted their inventory toward more profitable items like nutcrackers and gift baskets. They’ve also observed more cautious consumer behavior, with customers opting for $100 gift baskets instead of $150 versions, or purchasing single ornaments rather than multiple pieces.

“We’re definitely seeing more cautious spending this year,” Butler noted.

A perfect storm of economic factors—unpredictable tariffs, persistent inflation, and weak hiring—has dampened consumer confidence across the United States. According to a December poll from The Associated Press-NORC Center for Public Affairs Research, most Americans report noticing higher-than-usual prices for groceries, electricity, and holiday gifts.

Consumer sentiment has reached concerning lows. Gallup’s index measuring Americans’ assessment of current economic conditions fell to a 17-month low in November. The same survey revealed diminished enthusiasm for holiday spending, with estimated gift budgets dropping by $229 between October and November—the largest decrease Gallup has recorded at that point in the holiday shopping season.

The impact of tariffs has varied across popular gift categories, with some products feeling greater effects than others.

Games and toys have been particularly vulnerable to tariff-related price increases since most sold in the U.S. are manufactured in China. The Trump administration’s tariff rate on Chinese goods fluctuated dramatically, starting at an additional 10%, peaking at 145%, and eventually settling at 47%.

This volatility created significant challenges for toy retailers planning their holiday inventory. Dean Smith, co-owner of JaZams toy stores in Princeton, New Jersey, and Lahaska, Pennsylvania, said the Chinese manufacturers he works with have gradually increased prices with each reorder.

“Wholesale prices for 80% of my inventory went up anywhere from 5% to 20%,” Smith explained. This has forced him to raise retail prices accordingly—dolls that sold for $20-$25 last year now cost $30-$35.

“For folks with marginal incomes, this is going to be a very difficult holiday,” he added.

The electronics sector has experienced similar disruptions. China accounts for 78% of U.S. smartphone imports and 79% of laptop and tablet imports, according to the Consumer Technology Association.

Best Buy acknowledged raising prices due to tariffs earlier this year. However, CEO Corie Barry recently explained that the electronics retailer deliberately stocked products at various price points to accommodate different budgets, a strategy she credits for attracting more lower-income shoppers.

“The consumer is not a monolith,” Barry told reporters.

Game consoles, perennially popular holiday gifts, have seen notable price increases. Sony raised the PlayStation 5 price by $50 to $550 in August, following similar moves by Microsoft and Nintendo for their consoles.

In the jewelry sector, price increases have been driven more by soaring gold prices than by tariffs, according to David Bonaparte, president and CEO of Jewelers of America. However, the varying tariff rates established by the Trump administration have impacted jewelry imports in different ways.

Watches from Switzerland faced a 39% tariff from July 31 until the country negotiated a deal last month to lower the import tax rate to 15%. India, a major diamond refiner for the U.S. market, expedited shipment of gemstones before a 50% tariff took effect on August 27.

“It’s really a matter of what happens after January 1,” Bonaparte said. “If these tariffs are still in place, then prices will probably increase.”

Holiday decorations, predominantly imported from China, have also felt the tariff impact. Jeremy Rice, co-owner of House, a home-décor shop in Lexington, Kentucky, that specializes in artificial flowers and seasonal decorations, experienced delayed production for much of his fall inventory. He chose not to order certain larger, expensive items because the retail price would have been prohibitively high.

Rice raised prices on available products, with popular red berry stems increasing from $8.95 to $10.95.

“We sell thousands of these berry stems, and every time we sold one, I flinched from knowing what it should have been, knowing that our supplier paid more for them, which made us pay more for them, which made our customer pay more for them,” Rice said.

For consumers looking to avoid tariff-related price increases, John Harmon, managing director of technology research at Coresight Research, recommends exploring secondhand stores and discount retailers like T.J. Maxx and HomeGoods, which often stock inventory that entered the U.S. before new tariffs were implemented. Joe Adamski, senior director at ProcureAbility, suggests domestically produced goods like books, food, and beverages as gift alternatives less affected by import taxes.