Embrace the "worst-case scenario"! American retail giants collectively warn: the impact of tariffs is still escalating, and price increases are inevitable

From food giants to hardware chains, American companies are warning that a new round of pricing pressure is on the way, with the transmission effects of tariffs already beginning to show up on store shelves. Retail executives and analysts generally believe that the worst situation for consumers and businesses may not have arrived yet, as higher-cost inventory continues to arrive at ports.

Retail giants like Walmart, Target, and Best Buy have all indicated in recent weeks that some tariff-related price increases have begun to seep into food, household goods, and electronics. Food packaging giant J.M. Smucker warned this week that more products will see price hikes after tariffs caused its U.S. coffee business profits to plummet by 22%. Hormel Foods, which owns brands like Spam and Skippy, also reported disappointing results due to "sharp increases in commodity input costs," with its stock price dropping 12% after the warning.

Adding to market uncertainty, a federal appeals court ruled last Friday evening that most of President Trump's global import tariffs exceeded his statutory authority, but allowed these tariffs to remain in effect while the government appeals to the U.S. Supreme Court. This ruling has left retailers and consumers in a state of uncertainty regarding the future costs of imported goods.

"You can't control those controllable factors right now," Mickey Drexler, former CEO of Gap and current chairman of fashion brand Alex Mill, told Yahoo Finance before the latest tariff developments:

"In terms of retail and profits, you have no idea what the cost of goods will be... I think we haven't even seen the worst of it yet."

Cost Transmission: Retailers Say Price Increases Are Inevitable

Retail executives warn that with a new batch of higher-cost inventory arriving, more price increases will occur in the future. This pressure forces retailers of all sizes to make decisions about how much cost they can absorb and how much must ultimately be passed on to consumers.

"We've kept prices as low as possible for as long as we can," Walmart CEO Doug McMillon said last week:

"As we replenish inventory at post-tariff price levels, we see costs continuing to rise week by week, and we expect this to continue into the third and fourth quarters."

This cost transmission mechanism is having a direct impact on the consumer market. The price pressures from tariffs are further exacerbating the "K-shaped" divergence in the U.S. economy. Tom Essaye, founder of Sevens Report Research, told the media that high-income consumers are still supporting the economy, while low-income consumers are being squeezed by the impacts of tariffs and inflation.

The deterioration of consumer confidence has become a common phenomenon. The University of Michigan's consumer confidence survey for August showed that the index fell nearly 6% month-over-month and over 14% year-over-year. Among them, consumer inflation expectations for the coming year rose from 4.5% to 4.8%, and the durable goods buying conditions index dropped to its lowest point in a year.

Survey director Joanne Hsu pointed out that this decline in confidence is evident across "different age, income, and stock wealth groups," highlighting the universality of price anxiety

Behavioral Shift: Discount Retailers Benefit from "Value Shopping"

A cautious consumer mindset is reshaping the shopping habits of Americans, with households at different income levels becoming more selective about where and how they spend.

Whirlpool CEO Marc Bitzer noted that consumers are "choosing to shift towards lower-end products." Procter & Gamble CEO Jon Moeller also stated that he has observed a "moderate consumption downgrade" among consumers within their brand portfolio, such as opting for the cheaper Gain laundry detergent.

Brett Rose, CEO of United National Consumer Suppliers, which supplies retailers like Walmart, Macy's, TJX Companies, and Amazon, described this behavior as "alternative" purchasing rather than purely a consumption downgrade. Rose explained:

"Consumers will say, 'I won't buy a Jo Malone candle, but I will buy a candle that is reasonably priced and of great quality.' I can walk into TJX, Ross, or Marshalls and still find those brands at a lower price."

This consumption dynamic has helped budget and discount retailers gain market share. Chains like Dollar Tree, Five Below, and TJX Companies have all reported increased demand in recent months. Since the beginning of the year, the stock prices of these three companies have risen approximately 45%, 37%, and 14%, respectively.

However, as tariffs continue to alter the pricing landscape, consumer habits are also evolving, and the road ahead is far from clear. As retail veteran Drexler stated:

"If someone says they have the answers, I hope they will call me and tell me what the answers are."