There’s another reason for the persistence of consumer strength: Shoppers haven’t yet felt the sting of higher prices. That is largely because many retailers imported products ahead of spring and summer tariff implementations, allowing them to keep most of their prices unchanged, and have been willing to eat some of the higher costs.
The reaction to earnings, however, suggests that doubts are seeping in. Walmart stock dropped 4.5% on the day of its release, while BJ’sWholesale Club lost 6%, and Target, 6.3%, though the last had more to do with its choice of a new CEO than its business. And those doubts largely stem from new tariffs as retailers restock inventories for the holiday season and companies are forced to pass on higher import costs to consumers to protect margins. “I don’t think you really start to feel the pinch of tariffs until the third quarter, so I think that’s the make-or-break quarter,” says Steven Shemesh, an analyst at RBC Capital Markets.
Look no further than Walmart, whose stock has earned a premium valuation for its ability to attract shoppers with its low prices. On Thursday, CEO Doug McMillon said the impact of tariffs has been “gradual enough that any behavioral adjustments by the customer have been somewhat muted.” But he warned that the company has seen costs increase each week as it replenishes its inventories at post-tariff price levels—a trend that McMillon expects to continue into the third and fourth quarters. And while Walmart plans to keep prices as low as possible, some increases are inevitable, especially after the company missed earnings expectations despite its superior revenue growth.
~ Sabrina Escobar, "Walmart and Other Retailers Have Eaten the Cost of Tariffs. Now It Is the Consumer’s Turn.," Barron's, August 22, 2025
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