President Trump’s 2025 package of higher tariffs, tax cuts and tighter immigration controls is reshaping US consumer markets. Uncertainty and rising inflation expectations are dampening demand, and spending growth across all categories is expected to moderate, with no clear winners. While many incentives may sunset with the 2029 term limit, elevated tariffs and weaker investment incentives are likely to suppress confidence and spending for at least another two years post-administration.
Policy shifts are quietly eroding purchasing power growth
Policy shifts in the US are driving up costs and eroding US consumer purchasing power. On 5 April, the administration imposed a 10% tariff on all non-North American imports, with reciprocal levies of up to 50% under review, reigniting concerns about inflation. Plans to extend and deepen the 2017 Tax Cuts and Jobs Act could boost income and expenditure but, often, higher spending also comes with higher inflation, which would add to the impact of the aforementioned tariffs. Finally, tighter migration laws and increased deportations are expected to reduce labour supply, accelerate wage growth and, consequently, again – result in higher consumer prices.
Yet, near-term inflation remains muted. Although companies like Walmart, Best Buy, Mattel, and others openly declare their plans to raise prices, the Consumer Price Index for all urban consumers increased by 0.2% in April, according to the latest data from the US Bureau of Labor Statistics. Meanwhile, personal incomes rose by 0.8% in April, outpacing the 0.3% forecast, while the personal consumption expenditure index increased by 0.1%. Consumer spending slowed to a 0.2% increase as the savings rate climbed to 4.9%, its highest in a year. Heightened uncertainty and economic anxiety are prompting households to rebuild buffers rather than unlock spending, reflecting a prudent stance until policy outcomes become clearer.
All consumer segments bear pressure
Under a full-blown Trump Total Agenda scenario – including high tariffs, deep tax cuts and mass deportations – the outlook for all US households deteriorates markedly. For example, even for the wealthy, who are said to reap significant benefits from tax cuts, the effect of uncertainty on the asset markets (largely kept in stocks, bonds and/or real estate) and the deterioration of purchasing power is expected to be higher. Euromonitor's Income and Wealth Distribution Model forecasts that the top affluent (incomes above USD115,000, wealth above USD480,000) would contract by 13% and see their incomes fall by 6% relative to baseline growth of 10.3% if the scenario does not materialise.
The category-specific spending outlook is dim too
Aggregate consumer expenditure is projected to rise by mid-single digits by 2030 under a stable policy regime; however, the Trump administration's agenda would substantially trim this growth. While the real impact differs across the segments and spending categories, no winners can be clearly predetermined.
High earners, for example, are expected to cut back in both discretionary and essential categories under the Trump Total Agenda, with clothing and footwear spending growth anticipated to decline from an expected 22% to just 2%. Leisure and recreation, as well as expenditures on alcoholic beverages and tobacco, would also slow considerably, redirecting budgets towards housing and healthcare, categories that occupy a high place in the value hierarchy for these consumers.
Lower-income consumers may see modest aggregate spending gains driven by population growth rather than real income increases. Only clothing, footwear and education are forecast to decline under both the baseline and Trump Total Agenda scenarios. Meanwhile, health goods and medical services are expected to prove most resilient for this cohort, buoyed by higher volume demand and Medicaid cuts. Likewise, SNAP benefit reductions are projected to increase real-term food and beverage spending through to 2030, even further squeezing the remaining budget outlays for modest-income earning consumers.
Recommendations for business in times of uncertainty
- Unlock affordability, value, and choice through expanded private label lines, “buy now, pay later” options, and value-focused bundles, providing price-sensitive shoppers with compelling alternatives.
- Build lasting consumer trust with transparent pricing breakdowns, proactive communication on tariff impacts and clear, hassle-free return policies, reinforcing brand reliability in an environment of heightened uncertainty.
- Enhance the customer journey by simplifying purchase paths, personalising experiences and front-loading targeted promotions to secure pre-tariff pricing, ensuring consumers feel valued and confident despite cost pressures.
Learn more about consumer income and expenditure in our reports, Top Five Trends in Income and Expenditure and Global Overview of Income and Expenditure. Learn about the new US regulation impact on different industries in our report, How Trump's Economic Policies Affect Industries and Consumer Markets.
