U.S. retail sales slide after a spring rush to beat tariffs
By CHRISTOPHER RUGABER and ANNE D'INNOCENZIO
Retail sales fell sharply in May as consumers pulled back from a spending surge early this year to get ahead of President Donald Trump's sweeping tariffs on nearly all imports.
Sales at retail stores and restaurants dropped 0.9% in May, the Commerce Department said Tuesday, after a decline of 0.1% in April. Sales jumped 1.5% in March. The figure was pulled down by a steep drop in auto sales, after Americans ramped up their car-buying in March to get ahead of Trump's 25% duty on imported cars and car parts. Excluding autos, sales fell 0.3% in May.
The sales drop is hitting after sharp declines in consumer confidence this year. Still, inflation has cooled steadily and unemployment remains low, which could fuel steady spending in the coming months, as the economy has remained mostly solid.
A category of sales that excludes volatile sectors such as gas, cars, and restaurants rose last month by 0.4%, a sign that consumers are still spending on some discretionary items.
Overall, the report suggests consumers have pulled back a bit but not dramatically so. The retail sales report covers about one-third of consumer spending, with the other two-thirds consisting of spending on services. Economists expect overall consumer spending to grow in the April-June quarter.
'Today's data suggests consumers are downshifting, but they haven't yet slammed the brakes,' Ellen Zentner, chief economic strategist for Morgan Stanley wealth management, said in an email. 'Like the economy as a whole, consumer spending has been resilient in the face of tariff uncertainty.'
Yet many categories saw sharp declines. Car sales plunged 3.5%, while sales at home and garden centers dropped 2.7%. They fell 0.6% at electronics and appliance stores and 0.7% at grocery stores. There were some bright spots: Sales rose 0.9% at online retailers, 0.8% at clothing stores, and 1.2% at furniture stores.
Gas station sales dropped sharply, by 2%, but that mostly reflects lower prices. The retail sales report isn't adjusted for inflation.
Sales at restaurants and bars, a closely watched indicator of discretionary spending, fell 0.9% in May, though that followed a solid gain of 0.8% in April.
Some consumer products companies say they are seeing the impact of tariffs on their own costs and sales.
Paul Cosaro, CEO of Picnic Time, Inc., which makes picnic accessories like baskets, coolers, and folding chairs, said that orders from retailers are down as much as 40% this summer compared with a year ago. His company sells to a variety of stores like Target and Williams-Sonoma.
Cosaro noted that some stores have been cautious because they're not sure how shoppers will react to higher prices. Some canceled orders because Cosaro couldn't tell them how much the new prices would be due to all the uncertainty. Roughly 80% of the company's goods are made in China, with the rest in India and Vietnam.
The company, founded roughly 40 years ago and based in Moorpark, California, was forced to raise prices on average from 11% to 14% for this summer selling season, Cosaro said.
A folding outdoor chair now costs $137 this month, up from $120 in late 2024, he added. The company's sales are still down this year, even though some shoppers accelerated their purchases out of concern that prices would rise.
'Shoppers are very price sensitive,' Cosaro said.
The company has implemented a hiring freeze because of all the extra tariff costs, he added. So far this year the company, which employs from 70 to 100 people, has had to pay $1 million in tariffs. A year ago at this time, the bill was a third of that amount.
Liza Gresko, a 42-year-old mother of three in Doylestown, Pennsylvania, said she has watched as prices for basics like toothpaste or shampoo begin to rise again, and has started to buy groceries in bulk to save money, as well as switching to generic brands.
'If I make these small changes, then we are sacrificing for the long term goal of saving more,' Gresko said.
She has also begun shopping at thrift stores for children's clothes, rather than Macy's or H&M.
'Even with store sales and discounts, the rising costs make it unsustainable to continually purchase new clothing,' she said.
The retail sales report comes as other evidence indicates shoppers have been pulling back more amid worries about higher prices from Trump's tariffs.
Naveen Jaggi, president of retail advisory services in the Americas for real-estate firm JLL, said that he's hearing from malls that sales are slowing down heading into the official summer months. Retailers are pushing up back-to-school promotions to this month from July, he said. They want to get shoppers in early for fear consumers may not want to spend in the later months when prices will likely go up, he said.
So far, Trump's tariffs haven't yet boosted inflation. Consumer prices rose just 2.4% in May compared with a year ago, the government said last week.
Many stores and brands, including Walmart, Lululemon, and J.M. Smucker Co., have said they plan to or have raised prices in response to tariffs.
Deckers Outdoor, which is behind such shoe labels as Hoka and Uggs, said late last month that it plans price increases, which will likely hurt sales.
'We expect to absorb a portion of the tariff impact,' Chief Financial Officer Steven Fasching told analysts. 'We also believe there is potential to see demand erosion associated with the combination of price increases and general softness in the consumer spending environment.'
© Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
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Japan Today
5 hours ago
- Japan Today
Tariffs threaten Asian beauty product boom in U.S.
By MAE ANDERSON When Amrita Bhasin, 24, learned that products from South Korea might be subject to a new tax when they entered the United States, she decided to stock up on the sheet masks from Korean brands like U-Need and MediHeal she uses a few times a week. 'I did a recent haul to stockpile,' she said. 'I bought 50 in bulk, which should last me a few months.' South Korea is one of the countries that hopes to secure a trade deal before the Aug. 1 date President Donald Trump set for enforcing nation-specific tariffs. A not-insignificant slice of the U.S. population has skin in the game when it comes to Seoul avoiding a 25% duty on its exports. Asian skin care has been a booming global business for a more than a decade, with consumers in Europe, North and South America, and increasingly the Middle East, snapping up creams, serums and balms from South Korea, Japan and China. In the United States and elsewhere, Korean cosmetics, or K-beauty for short, have dominated the trend. A craze for all-in-one 'BB creams' — a combination of moisturizer, foundation and sunscreen — morphed into a fascination with 10-step rituals and ingredients like snail mucin, heartleaf and rice water. Vehicles and electronics may be South Korea's top exports to the U.S. by value, but the country shipped more skin care and cosmetics to the U.S. than any other last year, according to data from market research company Euromonitor. France, with storied beauty brands like L'Oreal and Chanel, was second, Euromonitor said. Statistics compiled by the U.S. International Trade Commission, an independent federal agency, show the U.S. imported $1.7 billion worth of South Korean cosmetics in 2024, a 54% increase from a year earlier. 'Korean beauty products not only add a lot of variety and choice for Americans, they really embraced them because they were offering something different for American consumers,' Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said. Along with media offerings such as 'Parasite' and 'Squid Game,' and the popularity of K-pop bands like BTS, K-beauty has helped boost South Korea's profile globally, she said. 'It's all part and parcel really of the same thing,' Lovely said. 'And it can't be completely stopped by a 25% tariff, but it's hard to see how it won't influence how much is sold in the U.S. And I think what we're hearing from producers is that it also really decreases the number of products they want to offer in this market.' Senti Senti, a retailer that sells international beauty products at two New York boutiques and through an e-commerce site, saw a bit of 'panic buying' by customers when Trump first imposed punitive tariffs on goods from specific countries, manager Winnie Zhong said. The rush slowed down after the president paused the new duties for 90 days and hasn't picked up again, Zhong said, even with Trump saying on July 7 that a 25% tax on imports from Japan and South Korea would go into effect on Aug. 1. Japan, the Philippines and Indonesia subsequently reached agreements with the Trump administration that lowered the tariff rates their exported goods faced — in Japan's case, from 25% to 15% — still higher than the current baseline of 10% tariff. But South Korea has yet to clinch an agreement, despite having a free trade agreement since 2012 that allowed cosmetics and most other consumer goods to enter the U.S. tax-free. Since the first store owned by Senti Senti opened 16 years ago, beauty products from Japan and South Korea became more of a focus and now account for 90% the stock. The business hasn't had to pass on any tariff-related costs to customers yet, but that won't be possible if the products are subject to a 25% import tax, Zhong said. 'I'm not really sure where the direction of K-beauty will go to with the tariffs in place, because one of the things with K-beauty or Asian beauty is that it's supposed to be accessible pricing,' she said. Devoted fans of Asian cosmetics will often buy direct from Asia and wait weeks for their packages to arrive because the products typically cost less than they do in American stores. Rather than stocking up on their favorite sunscreens, lip tints and toners, some shoppers are taking a pause due to the tariff uncertainty. Los Angeles resident Jen Chae, a content creator with over 1.2 million YouTube subscribers, has explored Korean and Japanese beauty products and became personally intrigued by Chinese beauty brands over the last year. When the tariffs were first announced, Chae temporarily paused ordering from sites such as a shopping platform owned by an e-commerce company based in Hong Kong. She did not know if she would have to pay customs duties on the products she bought or the ones brands sent to her as a creator. 'I wasn't sure if those would automatically charge the entire package with a blanket tariff cost, or if it was just on certain items,' Chae said. On its website, YesStyle says it will give customers store credit to reimburse them for import charges. At Ohlolly, an online store focused on Korean products, owners Sue Greene and Herra Namhie are taking a similar pause. They purchase direct from South Korea and from licensed wholesalers in the U.S., and store their inventory in a warehouse in Ontario, California. After years of no duties, a 25% import tax would create a 'huge increase in costs to us,' Namhie said. She and Greene made two recent orders to replenish their stock when the tariffs were at 10%. But they have put further restocks on hold "because I don't think we can handle 25%,' Namhie said. They'd have to raise prices, and then shoppers might go elsewhere. The business owners and sisters are holding out on hope the U.S. and Korea settle on a lower tariff or carve out exceptions for smaller ticket items like beauty products. But they only have two to four months of inventory in their warehouse. They say that in a month they'll have to make a decision on what products to order, what to discontinue and what prices will have to increase. Rachel Weingarten, a former makeup artist who writes a daily beauty newsletter called 'Hello Gorgeous!,' said while she's devoted to K-beauty products like lip masks and toner pads, she doesn't think stockpiling is a sound practice. 'Maybe one or two products, but natural oils, vulnerable packaging and expiration dates mean that your products could go rancid before you can get to them,' she said. Weingarten said she'll still buy Korean products if prices go up, but that the beauty world is bigger than one country. 'I'd still indulge in my favorites, but am always looking for great products in general,' she said. Bhasin, in Menlo Park, California, plans to keep buying her face masks too, even if the price goes up, because she likes the quality of Korean masks. 'If prices will go up, I will not shift to U.S. products,' she said. 'For face masks, I feel there are not a ton of solid and reliable substitutes in the U.S.' © Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
Japan Today
2 days ago
- Japan Today
Trump says Japan will invest $550 billion in US at his direction. It may not be a sure thing
A staff member distributes an extra edition of the Yomiuri Shimbun newspaper reporting that President Donald Trump announced a trade framework with Japan on Tuesday, Wednesday, July 23, 2025, in Tokyo. The headline reads "U.S., a 15% tax on goods imported from Japan." (AP Photo/Eugene Hoshiko) By JOSH BOAK and MARI YAMAGUCHI President Donald Trump is bragging that Japan has given him, as part of a new trade framework, $550 billion to invest in the United States. It's an astonishing figure, but still subject to negotiation and perhaps not the sure thing he's portraying. "Japan is putting up $550 billion in order to lower their tariffs a little bit," Trump said Thursday. 'They put up, as you could call it, seed money. Let's call it seed money.' He said 90% of any profits from the money invested would go to the U.S. even if Japan had put up the funds. 'It's not a loan or anything, it's a signing bonus,' the Republican president said, on the trade framework that lowered his threatened tariff from 25% to 15%, including on autos. A White House official said the terms are being negotiated and nothing has been formalized in writing. The official, who insisted on anonymity to detail the terms of the talks, suggested the goal was for the $550 billion fund to make investments at Trump's direction. The sum is significant: It would represent more than 10% of Japan's entire gross domestic product. The Japan External Trade Organization estimates that direct investment into the U.S. economy topped $780 billion in 2023. It is unclear the degree to which the $550 billion could represent new investment or flow into existing investment plans. What the trade framework announced Tuesday has achieved is a major talking point for the Trump administration. The president has claimed to have brought trillions of dollars in new investment into the U.S., though the impact of those commitments have yet to appear in the economic data for jobs, construction spending or manufacturing output. The framework also enabled Trump to say other countries are agreeing to have their goods taxed, even if some of the cost of those taxes are ultimately passed along to U.S. consumers. On the $550 billion, Japan's Cabinet Office said it involves the credit facility of state-affiliated financial institutions, such as Japan Bank for International Cooperation. Further details would be decided based on the progress of the investment deals. Japanese trade negotiator Ryosei Akazawa, upon returning to Japan, did not discuss the terms of the $550 billion investment. Akazawa said he believes a written joint statement is necessary, at least on working levels, to avoid differences. He is not thinking about a legally binding trade pact. The U.S. apparently released its version of the deal while Japanese officials were on their return flight home. 'If we find differences of understanding, we may have to point them out and say 'that's not what we discussed,'' Akazawa said. The U.S. administration said the fund would be invested in critical minerals, pharmaceuticals, computer chips and shipbuilding, among other industries. It has said Japan will also buy 100 airplanes from Boeing and rice from U.S. farmers as part of the framework, which Treasury Secretary Scott Bessent said would be evaluated every three months. 'And if the president is unhappy, then they will boomerang back to the 25% tariff rates, both on cars and the rest of their products. And I can tell you that I think at 25, especially in cars, the Japanese economy doesn't work,' Bessent told Fox News' 'The Ingraham Angle.' Akazawa denied that Bessent's quarterly review was part of the negotiations. 'In my past eight trips to the United States during which I held talks with the president and the ministers," Akazawa said. 'I have no recollection of discussing how we ensure the implementation of the latest agreement between Japan and the United States.' He said it would cause major disruptions to the economy and administrative processes if the rates first rise to 25% as scheduled on Aug. 1 and then drop to 15%. 'We definitely want to avoid that and I believe that is the understanding shared by the U.S. side,' he said. On buying U.S. rice, Japanese officials have said they have no plans to raise the current 770,000-ton 'minimum access' cap to import more from America. Agricultural Minister Shinjiro Koizumi said Japan will decide whether to increase U.S. rice imports and that Japan is not committed to a fixed quota. Trump's commerce secretary, Howard Lutnick, has suggested that the Japanese agreement is putting pressure on other countries such as South Korea to strike deals with the U.S. Trump, who is traveling in Scotland, plans to meet on Sundayv with European Commission President Ursula von der Leyen to discuss trade. 'Whatever Donald Trump wants to build, the Japanese will finance it for him,' Lutnick said Thursday on CNBC. 'Pretty amazing.' Yamaguchi reported from Tokyo. © Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
Yomiuri Shimbun
3 days ago
- Yomiuri Shimbun
They're Rich. They're Anti-Trump. And They Don't Want Their Big Tax Cut.
Kimberly Hoover has been to most Michelin-star restaurants on the East and West coasts. She and her wife, multimillionaires from their real estate firms, own homes in or near New York City, Washington, Miami and Quebec. Their lives are filled with skiing, fine wine and long trips to Europe. Hoover's accountant estimates that the new tax law that President Donald Trump signed this month will save her several million dollars over the next few years. While many Americans might rejoice at that kind of windfall, Hoover worked hard to stop it from becoming a reality, arguing to lawmakers that she has more money than she needs. 'At some point, it starts to feel wrong. It starts to feel excessive. It starts to feel somehow inappropriate. And at some point, it just doesn't feel good,' said Hoover, who spoke while on break from a sapphic literature conference she helps sponsor in Albany. 'Imbalanced is really not good for anyone, even if you're on the positive end of that imbalance, because it's unsustainable.' Hoover's experience reflects an unusual irony of Trump's signature tax legislation: Many of its biggest beneficiaries fiercely oppose the president – and even oppose policies he is pushing that will make them richer. The mismatch is partly a result of a crucial, if ongoing, evolution of the role class plays in American politics. During the administrations of Ronald Reagan, George H.W. Bush, and George W. Bush, affluent Americans who benefited from tax cuts were more likely to be Republicans. The political party they supported delivered material benefits that boosted their pocketbooks. Democratic voters, by comparison, were more likely to be working or middle class. Now, more than half of upper-income families – defined as those earning more than $215,400 per year – vote Democratic, according to a 2024 Pew Research survey, as more highly educated voters shift to the left. The top fifth of earners went from supporting Barack Obama in 2008 by a 2.5-point margin to supporting Joe Biden in 2020 by close to 15 percentage points. 'Affluent Americans used to vote for Republican politicians. Now they vote for Democrats,' one 2023 paper found. That shift intensified during the 2024 presidential election, when large numbers of Black and Latino voters, who tend to be lower-income, defected to the Republican ticket for the first time in decades, according to several political scientists, exit polls and studies. 'There's been a lot of talk about how even though the Republican coalition has changed and gotten more working class, their policies have not,' said Matt Grossmann, a political scientist at Michigan State University. 'But there's been less attention to a similar but true fact on the other side – a lot of Democratic politicians were elected by very rich constituents who are more likely to benefit from Republican tax policy than Democratic policy.' As a result, many of the provisions of the GOP tax law will benefit a voting bloc that is increasingly Democratic. The $3.4 trillion legislation extends a lower tax rate for the top tax bracket, rejecting the president's suggestion of a new tax on million-dollar earners. It expands and makes permanent a smaller federal estate tax, allowing up to $15 million to be passed on tax-free ($30 million for couples). It also makes permanent a large deduction for businesses formed as pass-through entities, while raising the cap on what filers can deduct in state and local taxes. (The GOP's 2017 tax law also permanently lowered the corporate tax rate from 35 percent to 21 percent.) When all these provisions are combined, Trump's second tax bill devotes roughly $1 trillion in tax cuts for those earning more than $400,000 per year – roughly the size of the law's cuts to Medicaid, the federal health insurance program for the poor. (Most of the bill's cost, though, comes from provisions that largely benefit middle-class households, such as a larger child tax credit and standard deduction.) Steve Lockshin, a financial adviser and co-founder of the estate advisory platform Vanilla, represents clients with at least $50 million and whose fortunes are sometimes in the billions of dollars. A tax cut of about 2 percent for a middle-class family translates into about $1,800 per year, according to the Tax Policy Center, a nonpartisan think tank. But for Lockshin's clients, saving several percentage points in taxes can mean hundreds of thousands of dollars, if not millions, per year. One provision that has become particularly beneficial to his clients is the law's expansion of 'Opportunity Zones,' which allow investors to defer capital gains taxes by reinvesting profits into designated economically distressed areas. The program allows wealthy individuals to delay or, in some cases, permanently avoid paying taxes on capital gains if they make investments in specified zones. 'The general mentality is the same across the board with my clients: 'I want to pay the least I can. I also want the best for my country, and I would invert the two if it had a meaningful impact,'' Lockshin said. 'And if you are wealthy – but aren't pro-Trump and just along for the ride – most of my network is thinking, 'While Rome is burning, at least I'll save a few dollars in taxes.'' Opposition to tax cuts has surfaced in many wealthy liberal enclaves. At the Harvard Club in New York City, 'everyone under 50 feels this way,' said Bob Elliott, chief executive of Unlimited, an investment firm. 'The classic question is how much do you worry about it benefiting yourself versus the societal consequences – that's the trade-off,' Elliott said. 'Many of the people who don't like the bill are saying, 'Really, even if I get money, it's still at the expense of taking people off Medicaid.'' Nonpartisan estimates have found that the GOP tax law will lead to more than 13 million fewer Americans having health insurance. Some experts say rich people have self-interested reasons to oppose the tax cuts that go beyond the broader social consequences. Many of the law's short-term benefits come with long-term drawbacks, said Constance Hunter, chief economist at the Economist Intelligence Unit, a research firm. That, she said, is because many people at least intuitively understand the concept of 'Ricardian equivalence' – the idea that deficits will need to be paid for eventually through higher taxes, so consumers adjust their behavior accordingly by saving more in preparation. 'I think there are a number of people, some of whom are affluent and that span the political spectrum, who realize we cannot keep expanding our deficits indefinitely, especially at a time when our economy is showing resilience and growing,' Hunter said. 'A lot of wealth is held by business owners, and while certain provisions may be providing tax cuts now, these are likely to be accompanied by greater financing costs for business owners,' as reflected in the higher interest rates needed to combat increases in inflation. Drew E. Pomerance, a Los Angeles lawyer in business and commercial litigation, said that his net worth is in the tens of millions of dollars and that he will probably save tens of thousands of dollars from the law every year. While he said 'it never ceases to amaze me that people vote against their own economic self-interest,' he also said he will benefit from the bill but thinks 'it's terrible for America.' 'Don't get me wrong: I like money. I like having money. I'm not opposed to having money,' he said. 'But at the expense of what it does to the rest of the country, it should not be a priority to give me and other rich people more money.' The willingness of some liberals to vote against their economic self-interest should give them pause before they accuse conservatives of doing the same, said Michael Strain, an economist at the American Enterprise Institute, a right-leaning think tank. He said Republican voters in lower-income states are often unfairly maligned this way, pointing to the 2004 book 'What's the Matter With Kansas?' 'Nothing is the matter with Kansas. The people of Kansas vote for a variety of reasons, one of which is economic self-interest,' Strain said. Some multimillionaires, such as Morris Pearl, who served as managing director at the investment firm BlackRock, say they are getting money from the tax cut they do not need. (Pearl, like Hoover and Pomerance, is part of Patriotic Millionaires, a group of rich Americans devoted to trying to raise taxes on the rich.) Pearl's mother-in-law died last year, and he and his wife benefited from the 2017 changes to the estate tax. He has taken advantage of the low-tax Opportunity Zone rules, though he does not remember where or how much he has invested. He will probably continue to do so now that they have been extended. 'It's great for me personally, financially,' Pearl said. 'But even looking at my own and my family's long-term self-interest, I would prefer less inequality and less of a country of very rich and very poor, and more of a country with lots of people doing all right.' In August, Pearl is traveling to a fundraiser for Democratic lawmakers in California. Every year, he donates hundreds of thousands of dollars to Democratic politicians, which he described as the first thing he would cut back on if his fortune started to shrink. Thanks in part to the GOP tax law, Pearl added, that is not going to happen any time soon.
