American retail sales slide after a spring surge to beat tariffs

Shoppers consider a purchase in a Costco warehouse, June 11, 2025, in Lone Tree, Colorado. (AP Photo/David Zalubowski)

WASHINGTON — Retail sales fell sharply in May as consumers pulled back from a spending surge early this year. The rush was to get ahead of President Donald Trump’s sweeping tariffs on nearly all imports.

Sales at retail stores and restaurants dropped 0.9 percent in May, the Commerce Department said Tuesday. That was after a decline of 0.1 percent in April. Sales jumped 1.5 percent in March.

The figure was pulled down by a steep drop in auto sales. Americans ramped up their car-buying in March to get ahead of Trump’s 25 percent duty on imported cars and parts. Excluding autos, sales fell 0.3 percent in May.

The sales drop is hitting after sharp declines in consumer confidence this year. Still, inflation has cooled steadily and unemployment remains low. This could fuel steady spending in the coming months, as the economy has remained mostly solid.

READ: US March retail sales surged as consumers sought to beat tariffs

A category of sales that excludes volatile sectors such as gas, cars, and restaurants rose last month by 0.4 percent. This is a sign that consumers are still spending on some discretionary items.

Overall, the report suggests consumers have pulled back a bit but not dramatically so. The retail sales report covers about one-third of consumer spending. The other two-thirds consist of spending on services. Economists expect overall consumer spending to grow in the April-June quarter.

“Today’s data suggests consumers are downshifting, but they haven’t yet slammed the brakes,” Ellen Zentner, chief economic strategist for Morgan Stanley wealth management, said in an email. “Like the economy as a whole, consumer spending has been resilient in the face of tariff uncertainty.”

Retail bright spots

Yet many categories saw sharp declines. Car sales plunged 3.5 percent, while sales at home and garden centers dropped 2.7 percent. They fell 0.6 percent at electronics and appliance stores and 0.7 percent at grocery stores.

There were some bright spots. Sales rose 0.9 percent at online retailers, 0.8 percent at clothing stores, and 1.2 percent at furniture stores.

Gas station sales dropped sharply, by 2 percent, but that mostly reflects lower prices. The retail sales report isn’t adjusted for inflation.

Sales at restaurants and bars, a closely watched indicator of discretionary spending, fell 0.9 percent in May. Still, that followed a solid gain of 0.8 percent in April.

Some consumer products companies say they are seeing the impact of tariffs on their own costs and sales.

Retailer’s travails

Paul Cosaro is CEO of Picnic Time Inc., which makes picnic accessories like baskets, coolers, and folding chairs. He said that orders from retailers are down as much as 40 percent this summer compared with a year ago. His company sells to a variety of stores like Target and Williams-Sonoma.

Cosaro noted that some stores have been cautious because they’re not sure how shoppers will react to higher prices. Some canceled orders because Cosaro couldn’t tell them how much the new prices would be due to all the uncertainty. Roughly 80 percent of the company’s goods are made in China, with the rest in India and Vietnam.

READ: Gov’t urged to take ‘preemptive’ steps vs effects of US tariffs

The company was founded roughly 40 years ago and based in Moorpark, California. It was forced to raise prices on average from 11 percent to 14 percent for this summer selling season, Cosaro said.

A folding outdoor chair now costs $137 this month, up from $120 in late 2024, he added. The company’s sales are still down this year. That, even though some shoppers accelerated their purchases out of concern that prices would rise.

“Shoppers are very price sensitive,” Cosaro said.

The company has implemented a hiring freeze because of all the extra tariff costs, he added. 

So far this year the company, which employs from 70 to 100 people, has had to pay $1 million in tariffs. A year ago at this time, the bill was a third of that amount.