Execs starting to worry about tariffs' effects on consumers

Associated Press

Americans continue to shop, vacation and buy cars at a brisk clip. But corporate America is starting to worry out loud that President Donald Trump's tariffs will depress consumer spending and undermine the economy.

Home Depot, the nation's largest home improvement chain, said as much today, when it reported higher-than-expected profits for the quarter but cut its sales expectations for the year, citing the tumbling price of lumber and the "potential impacts to the U.S. consumer arising from recently announced tariffs."

That marked at least the second time in a week that retail executives raised the fear that consumers might pull back on spending.

Last Wednesday, Macy's warned that its customers have no appetite for higher prices. The department store chain has already raised prices on luggage, housewares and furniture because of the 25 percent import duties imposed in May. CEO Jeff Gennette said Macy's is trying to offset the costs of looming tariffs on shoes and clothing.

So far, consumer spending has insulated the U.S. economy from the slump that is taking hold in such places as China and Germany. But Trump's trade wars with Beijing and other key trading partners have heightened anxieties.

Dozens of American companies have pared their profit and sales expectations. The markets have swung wildly. Barometers of housing and manufacturing have slumped. Consumer confidence, though healthy on a historical level, dropped sharply this month.

And that is especially troubling, because consumer spending accounts for roughly 70% of economic activity.

That recent slump in consumer confidence has raised the odds of a U.S. recession in the next year to 45 percent from 40 percent in mid-July, according to analysts for JPMorgan Chase.

If consumers are to keep fueling economic growth, they might need reassurance that Trump won't escalate his trade wars.