Investors in retail companies will likely keep pricing strategies under close scrutiny in the coming months, as markets evaluate whether sweeping U.S. tariffs are affecting consumer spending, according to UBS analysts.
In a note led by Michael Lasser, the analysts said that recent inflation data suggest the impact of the tariffs has been “minimal,” despite concerns that companies may increasingly pass the costs of duties on to consumers.
Data from the Bureau of Labor Statistics released Tuesday showed that prices for commodities excluding food and energy—an underlying inflation measure including tariff-sensitive items like home furnishings, apparel, and appliances—rose 1.2% over the twelve months to July. On a month-over-month basis, unadjusted for seasonal factors, the measure increased by 0.1%.
Annualized inflation has accelerated in recent months, rising from 0.1% in April to 0.3% in May, 0.7% in June, and now 1.2% in July.
While UBS noted that retailers’ price increases have been “modest, broadly speaking” since President Donald Trump introduced his aggressive “reciprocal” tariffs in early April, the analysts cautioned that the trend “could gain further momentum as additional tariffs take effect.”
“If [slash] when that happens, unit elasticities will likely have a heavy influence on the investment debates across this sector,” they added.
The bank highlighted that major retailers appear to have absorbed some tariff-related costs, pointing to signs of resilience in sales at giants like Amazon, Walmart, and Costco.
However, the analysts warned it is only a “matter of time” before tariffs contribute to headline inflation outpacing wage growth. They estimated that the duties could add roughly $1,700 in annual costs per U.S. household, citing projections from the Tax Foundation and The Yale Budget Lab.
This pattern could have “long-lasting effects” on both consumers and the broader U.S. economy. Consequently, UBS expects retailers with a “strong value offering” to be “better-positioned” than those passing on higher tariff costs—a dynamic that may also influence market share.
“Thus, it will become a key part of the investment debates in the retail landscape,” the analysts concluded.
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