Many business leaders are asking whether tariffs are going to make the US consumer pull back, and our view is: not directly, but maybe indirectly.

Ultimately, tariffs are a tax: Who pays and how much depends on who has leverage. This shock differs from the Covid-19 pandemic, during which supply shortages meant that costs were more easily passed through the full value chain. Now, it’s more likely that at least some of the extra costs will stay upstream of the consumer—with manufacturers, for instance.

Another limiting factor is that imports only represent less than 15% of US GDP, or about 35% of expenditure on goods alone (rather than goods and services).

For these reasons, the overall inflationary impact of price increases from tariffs (even if directly passed through the value chain) could be more muted than the inflation experienced during the post-pandemic period, but the impact on the consumer goods and retail sectors is likely to be more pronounced.

We believe tariffs might make US consumers pull back primarily for impacts they cause on assets these consumers hold, or the wages they collect: an “indirect” impact. 

According to a Bain survey conducted shortly before the tariff announcement on April 2, US consumers believe that inflation, illegal immigration, and affordability of healthcare are the top three issues facing the US today (see Figure 1). Only 23% identified tariffs as a top-three issue. The concern about tariffs was greater among those earning high incomes (26% of whom said it was a top-three issue) than those earning lower and middle incomes (19% and 23% of whom placed it in their top three).

When asked directly about the impact of tariffs on their personal finances, 66% of the consumers we surveyed this week said they expect tariffs to significantly impact the prices they pay for goods, particularly for vehicles and vehicle parts. But only about 15% have made any purchasing changes due to tariffs, such as pre-emptively buying electronics and shelf-stable groceries.

Consumers pull back spending when their assessment of their overall financial health diminishes. In the US, upper-income households base their financial outlook on market performance, as their net worth is dominated by assets in their portfolios, while middle-income and low-income households base their outlook on the housing market and their income (and any changes to it), respectively.

Historically, consumers prioritize spending on non-discretionary products during periods of recession and financial distress, and we see this already playing out in the airline sector, for example. In a development that’s unrelated to tariffs, the number and dollar value of tickets purchased for travel in the second and third quarters of 2025 are lagging the comparable yardsticks from last year (see Figure 2). The scaling back has been most significant in economy class tickets.

In recent quarters, we’ve also seen more grocery shoppers lean toward buying the cheapest brand rather than paying more for their favorite brand—33% now say they’ll buy the cheapest, up from 27% in 2021, according to data from NPS Prism®.

We encourage business leaders to look beyond just the tariffs: We have not seen the last of tariff volatility this week, nor do we expect to this month, or perhaps even this year. Instead, executive teams should watch the assets that consumers really care about for readouts on whether their intention to spend is likely to shift, particularly for discretionary items.

In our latest Macro Trends Group Consumer Health Index report, we see signs that middle-income households’ perception of the health of the housing market is slowly diminishing, and upper-income earners are in a crouch given the correction underway in US equities markets. A copy of the full report can be requested here.