U.S. Retail Sales Plummet in June Amidst Tariff Uncertainty

The U.S. retail sales declined by 1.2% in June, marking the second consecutive monthly decline and the largest drop since 2020. The decline was driven by a 3.5% drop in auto sales, as consumers continued to pull back on purchases ahead of expected tariff increases. While the data showed some signs of underlying weakness in consumer spending, economists anticipate that shoppers will continue to hold back on purchases until the tariffs are resolved.

The decline in retail sales was more than expected, indicating that the uncertainty surrounding tariffs is continuing to weigh on consumer spending. According to the Census Bureau data, U.S. sellers brought in $679.9 billion last month, down 1.2% from May’s levels, which were also revised lower. Economists surveyed by Dow Jones Newswire and The Wall Street Journal expected a decline of 0.9%.

The ongoing economic impacts of President Donald Trump’s tariff policy are being considered by economists as the sales data come in. Michael Feroli, chief U.S. economist at JPMorgan Chase, wrote that “retail sales continued to decline in June, reflecting the ongoing uncertainty surrounding tariffs and their potential impact on consumer spending.”

Motor vehicle sales were the weakest category, declining 3.5% in June. Consumers continued to expect that tariffs on automobiles and metals would raise car prices and rushed to purchase cars in May before import taxes pushed prices higher. “The decline in auto sales is a clear sign that consumers are pulling back on purchases ahead of expected tariff increases,” wrote Wells Fargo economists Tim Quinlan and Shannon Grein.

While the retail sales data showed some signs of weakness, other categories saw an increase in sales last month. The miscellaneous store category, which includes florists, office supply sellers, and other hard-to-classify retailers, saw an increase in sales. Sporting goods and furniture sellers also increased their sales last month.

Economists expect sales to continue to decline as uncertainty over tariffs persists. “The ongoing uncertainty surrounding tariffs is likely to keep a lid on consumer spending for the foreseeable future,” wrote Hoyt. “Even if prices do not rise as consumers expect and fear, some of the buying that took place in May and June was pulled forward from later in the year and will result in fewer purchases at that time.”

In conclusion, the U.S. retail sales declined for the second month in a row in June, driven by a significant drop in auto sales due to expected tariff increases. While other categories saw an increase in sales last month, economists anticipate that shoppers will continue to hold back on purchases until the tariffs are resolved. The ongoing uncertainty surrounding tariffs is likely to keep a lid on consumer spending for the foreseeable future.