Introduction to the Holiday Season
With summer in full swing in the United States, retail executives are sweating a different season. It’s less than 22 weeks before Christmas, a time when businesses that make and sell consumer goods usually nail down their holiday orders and prices.
The Impact of Tariffs on Holiday Shopping
But President Donald Trump’s vacillating trade policies, part of his effort to revive the nation’s diminished manufacturing base and to reduce the U.S. deficit in exported goods, have complicated those end-of-year plans. Balsam Hill, which sells artificial trees and other decorations online, expects to publish fewer and thinner holiday catalogs because the featured products keep changing with the tariff — import tax — rates the president sets, postpones and revises.
Uncertainty in the Retail Industry
“The uncertainty has led us to spend all our time trying to rejigger what we’re ordering, where we’re bringing it in, when it’s going to get here,” Mac Harman, CEO of Balsam Hill parent company Balsam Brands, said. “We don’t know which items we’re going to have to put in the catalog or not." Months of confusion over which foreign countries’ products may become more expensive to import has left a question mark over the holiday shopping season.
Consequences for Consumers
U.S. retailers often begin planning for the winter holidays in January and typically finalize the bulk of their orders by the end of June. The seesawing tariffs already have factored into their calculations. The consequences for consumers? Stores may not have the specific gift items customers want come November and December. Some retail suppliers and buyers scaled back their holiday lines rather than risking a hefty tax bill or expensive imports going unsold. Businesses still are setting prices but say shoppers can expect many things to cost more, though by how much depends partly on whether Trump’s latest round of “reciprocal” tariffs kicks in next month.
The Toy Industry: A Prime Example
The lack of clarity has been especially disruptive for the U.S. toy industry, which sources nearly 80% of its products from China. American toy makers usually ramp up production in April, a process delayed until late May this year after the president put a 145% tariff on Chinese goods, according to Greg Ahearn, president and CEO of the Toy Association, an industry trade group.
Retailers’ Strategies
In the retail world, planning for Christmas in July usually involves mapping out seasonal marketing and promotion strategies. Dean Smith, who co-owns independent toy stores JaZams in Princeton, New Jersey, and Lahaska, Pennsylvania, said he recently spent an hour and a half running through pricing scenarios with a Canadian distributor because the wholesale cost of some products increased by 20%. Increasing his own prices that much might turn off customers, Smith said, so he explored ways to "maintain a reasonable margin without raising prices beyond what consumers would accept.”
Adjusting to the New Reality
Hilary Key, owner of The Toy Chest in Nashville, Indiana, said she tries to get new games and toys in early most years to see which ones she should stock up on for the winter holidays. This year, she abandoned her product testing for fear any delayed orders would incur high import taxes. Meanwhile, vendors of toys made in China and elsewhere bombarded Key with price increase notices.
Port Activity and Tariff Impact
The Port of Los Angeles had the busiest June in its 117-year history after companies raced to secure holiday shipments, and July imports look strong so far, according to Gene Seroka, the port’s executive director. “In my view, we’re seeing a peak season push right now to bring in goods ahead of potentially higher tariffs later this summer," Seroka said Monday. The pace of port activity so far this year reflects a “tariff whipsaw effect” — imports slowing when tariffs kick in and rebounding when they’re paused, he said.
Conclusion
The ongoing tariff situation continues to create uncertainty for retailers and consumers alike. With the holiday season approaching, businesses are adjusting their strategies to mitigate the impact of potential price increases and reduced product availability. As the situation evolves, one thing is certain: this holiday season will be unlike any other, with tariffs bringing higher prices and fewer choices for consumers.
FAQs
- Q: How will tariffs affect the holiday shopping season?
- A: Tariffs are expected to lead to higher prices and fewer product choices for consumers.
- Q: How are retailers preparing for the holiday season?
- A: Retailers are adjusting their strategies, including scaling back holiday lines and exploring ways to maintain reasonable margins without raising prices beyond what consumers would accept.
- Q: What industries are most affected by the tariffs?
- A: The U.S. toy industry, which sources nearly 80% of its products from China, is among the most affected.
- Q: Will the tariffs lead to inventory shortages?
- A: Yes, the late start to factory work in China and the uncertainty surrounding tariffs may lead to inventory shortages, especially for popular items.
- Q: How can consumers prepare for the holiday season?
- A: Consumers can expect to see higher prices and fewer product choices. They may want to consider shopping earlier or looking for alternative products to avoid disappointment.
