Majority of Holiday Shoppers Refuse to Shoulder Tariff Burden. So Now What?

Even a “normal” holiday shopping season is a hectic time for both retailers and consumers; however, the added economic hurdles this year are causing chaos. Tariffs have hit the consumer goods and retail sector especially hard, with reciprocal and baseline duties compounding up to 30 percent to 70 percent depending on the supplying country.

Almost every U.S. company has an impossible decision to make this holiday season: pass the increase in their costs (including tariffs) onto their customers or find another way to shoulder the impact. At current duty rates, retailers have no choice but to pass on some of the burden — key word, "some." Goldman estimates that consumers are currently bearing 55 percent of these costs, but this number tips the scales too much in one direction. Maintaining this strategy could result in a worse impact than the tariffs themselves as shoppers majorly pull back spending.

Our recent 2025 Holiday Spending report found that 50 percent of U.S. consumers won’t shop with a brand that increases its prices, a 25 percent increase from our 2024 findings. Not surprising when you dig deeper to find out how shoppers are planning to cover expenses — 28 percent by dipping into savings and 19 percent by going into credit card debt.

Make Customer Experience Your Superpower

Retail giants have a bit more flexibility in their tariff strategy. Take American Eagle Outfitters, for example, which reduced its tariff burden by nearly 60 percent. The company used a myriad of methods including dynamic pricing, absorbing costs, negotiating with suppliers, and diversifying supply chains by using cheaper freight methods or countries with lower levies. Unfortunately, smaller retailers don’t have the same luxury to cut into profit margins or shift suppliers to different countries.

In uncertain times, simplicity becomes a superpower. For small-to-midsized retailers, double down on what you can control: the product and how you support your customers. Focus on delivering real value and tightening up operations, especially customer support, which starts first with transparency. Shoppers realize there will likely be shipping delays or rising prices, but they need to know why. The same report found 22 percent of U.S. consumers won’t shop with a retailer this season if there’s poor communication around delayed shipping.

Now is also a good time to mix up your offerings. You might not be able to offer discounts this year, but offering a buy now, pay later (BNPL) option at checkout can diminish the impact by allowing consumers to spread their spending over time, which could also incentivize more purchases. The holiday shopping season is also an opportunity to encourage consumers to join your loyalty or rewards program. A smaller retailer’s greatest strength is a loyal customer base, and capturing consumers during this busy season will yield long-term benefits for your business.

Most Americans will find a way to prioritize spending on gifts. In fact, one-third (37 percent) believe buying gifts this season is more important than their credit card balance. However, retailers need to overcommunicate on orders, be transparent on any price adjustments, and provide flexible offerings when absorbing tariff hikes aren’t an option.

A shifting policy landscape might complicate forecasting and hit bottom lines, but prioritizing superior service will foster loyal relationships with shoppers now and ensure they’ll also come back once the dust settles.

Petr Marek is the founder and CEO of Invoice Home, an invoice generating platform designed for small businesses, freelancers and entrepreneurs.