Did Consumers’ Tariff Fears Affect Their Spending in March?

Consumers say they’re worried about the economy’s direction, but those fears aren’t expected to appear in the March retail sales report.

Backed by high auto sales, consumers likely rushed to stores in March to avoid potential price increases spurred by tariffs. Economists surveyed by Dow Jones Newswire and The Wall Street Journal expect March retail sales data to increase by 1.2% over the prior month. The report is scheduled to be released on Wednesday at 8:30 a.m. ET.

“Consumers fretting over another spike in goods prices due to reciprocal and sectoral import tariffs implemented in April have been keen to speed up their planned goods purchases,” wrote Scott Anderson, chief U.S. economist at BMO Economics. 

Consumer spending is an important economic factor that has kept the country from recession in recent years. Economists have said a slowdown in spending could push the economy closer to a downturn.

Automobile Sales Seen as Driving March Growth

The spending surge would represent an improvement over the year’s slow start. February’s meager growth followed a “holiday hangover” plunge in January.  But while the overall numbers are expected to be good, the report’s details may not represent as much of an improvement as it appears. 

Automobile sales are expected to drive most of the sales growth, with early March data showing car sales reached their highest level since April 2021. Economists attributed this spike to car buyers looking to get ahead of U.S. tariffs of 25% on all imported cars.

Without the sales of automobiles and gasoline, BMO economists expect retail sales only grew by 0.2% in March.

Even with the car sales, March data isn’t expected to be enough to rescue retailers from poor first-quarter results, which is expected to be the softest for retail sales since 2020, Wells Fargo economists wrote.

“On balance, performance so far this year suggests consumer spending growth has stalled in the face of heightened uncertainty about tariffs and their impact on the outlook,” Wells Fargo wrote. 

Spending Slowdown May Be Coming

A recent spate of poor consumer sentiment surveys has economists projecting a slowdown in reports like retail sales and earnings, but it’s not likely to happen yet.

Consumer sentiment has declined for several months as President Donald Trump’s proposed tariff policies have raised concerns about higher inflation and created volatile market conditions. However, many tariffs didn’t go into effect until April and even then, may not have much effect on prices for some time.

“The deterioration in optimism is not a positive development for consumer spending, but we don’t expect it alone will drive households into hiding,” Wells Fargo economists Tim Quinlan and Shannon Grein.