Spending slows in April as effect of tariffs weighs on minds of consumers

There were some signs of continued appetite to spend in April with gains at bars and restaurants climbing at a 1.2% clip. Home and garden stores also saw a 0.8% increase, the largest jump since 2022. DAVID J. PHILLIP/AP FILE

Consumers are starting to close their wallets as President Donald Trump’s tariffs took effect after going on a spending spree in March to get ahead of expected price increases and unknowns about the economy’s future.

Retail sales were nearly flat in April with a 0.1% increase in spending compared to March when Americans increased purchases by a robust 1.7% to get ahead of expected tariffs. Last month’s spike was mostly fueled by consumers making big-ticket purchases like cars before the tariffs took effect and brought price increases.

Sales were unchanged or down for retailers in a variety of industries in an early sign of slower spending. Sporting goods stores saw a 2.5% drop, clothing shops saw a 0.4% dip and health and personal care stores lost 0.2%. Auto dealers slipped 0.1% after a 5.5% increase in March and sales at electronics and appliances stores rose just 0.3% after a 1.5% gain last month.

There were also some signs of continued appetite to spend with gains at bars and restaurants climbing at a 1.2% clip. Home and garden stores also saw a 0.8% increase, the largest jump since 2022.

The slowdown in spending highlights the uncertainty facing the U.S. economy as a result of back-and-forth tariff rollouts and sudden stops as the White House negotiates trade deals with dozens of countries that have added another unknown.

Trump’s “Liberation Day” that put huge tariffs on most of America’s biggest trading partners were rolled back within days of their announcement, but imports are still facing a baseline tariff of 10% as trade talks begin.

A trade war with China is also ongoing after the administration ramped up tariffs to 145% before a deal earlier this week that cut them to 35%, a still expensive level but a significant cut for businesses and consumers that has somewhat relieved fears of a sharp reduction in spending and a recession.

But the economy is still facing uncertainty as businesses try to brace for trade policy from the White House and how consumers will respond. Economists are expecting price increases because of tariffs to start to show up over the next few months, raising questions about whether consumers will continue to spend or close their wallets.

Walmart said on Thursday it would soon raise its prices to offset the effect of tariffs that could threaten its low-cost business model.

“We will do our best to keep our prices as low as possible but given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins,” CEO Doug McMillon said in a statement to The Associated Press.

Consumer sentiment about the economy has also plunged since January over anxieties about inflation and tariffs, raising questions about whether there will be a sharp pullback in spending that makes up nearly 70% of U.S. economic activity.

“You have no willingness, no income, and yet consumers are still spending. How can that be? Well, I think they’re turning to credit cards. We see that the outstanding credit card debt is continuing to grow, which maybe wouldn’t be that big of a deal, except we’re at 21% interest rates,” Dan North, senior economist at Allianz Trade Americas, said. “This raises a question of sustainability. Is the consumer going to keep doing this?

Economists are already anticipating reduced spending later this year as more price increases go into effect that will start to creep into economic data in the coming months.

Inflation has slowed for three consecutive months, but economists and the Federal Reserve are not expecting that to continue with businesses being forced to consider whether to raise prices because of tariffs. It will be difficult for them to discern what increases are caused directly by tariffs or other economic factors, adding to the Fed’s challenge about interest rates.

A bright spot for consumers is that layoffs have stayed low as companies have opted to keep workers despite uncertainty and reduced forecasts. Employers added a surprisingly strong 177,000 jobs in April and unemployment is at a low 4.2%. Applications for jobless benefits have also remained steady into May.

“The labor market is slowing up a little bit, but still at sort of normalized levels, it’s not in any sort of a crisis. We’re still creating jobs at a pretty good clip,” North said. “That really does support the consumer spending.”

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