Tariffs fuel fears of recession and inflation, clouding the retail environment

The challenge: Even before the Trump administration rolled out its sweeping “Liberation Day” tariff policies, retail executives from Abercrombie & Fitch to lululemon athletica to Walmart had been ringing the alarm that consumer spending was weakening.

With tariffs likely to push costs higher, spark inflation, and further dampen demand, the outlook has grown far more precarious. US retailers’ stock prices—alongside much of the broader market—are plunging.

The C-suite perspective: The mood among US CEOs is bleak. One executive told CNBC, “This is the Trump recession,” while JPMorgan Chase CEO Jamie Dimon wrote in his annual shareholder letter, “We’re not in Kansas anymore,” cautioning that tariffs will likely stoke inflation and heighten the risk of a recession.

A new CNBC flash survey of a sample of CNBC Council members underscores those concerns:

• Recession worries: A majority (69%) of CEOs now expect a recession, mirroring JPMorgan’s latest call of a 60% recession chance for this year.
• Price hikes: Nearly all CEOs whose companies sell goods or services plan to raise prices between 5% and 20%, and 82% predict “resurgent inflation.”
• Job cuts looming: More than one-third (37%) of CEOs anticipate reducing headcount this year, while another 14% haven’t ruled it out. Even before the tariff news, retailers slashed 57,804 jobs in Q1—a staggering 370% YoY increase.

The CEO who dubbed the economic downturn the “Trump recession” noted that the stock market’s decline will likely drive affluent consumers to cut back. The same “wealth effect” that boosts confidence when home or investment values rise works in reverse during a downturn, leading wealthier consumers to become more cautious.

Why it matters: As tariffs drive up costs for retailers, many are expected to pass at least some of those expenses onto their customers—further weakening consumers’ spending power and confidence. Layered onto an already fragile retail climate, the added pressures from inflation, job cuts, and falling market values could push the economy closer to a recession, hitting shoppers from all sides.

It’s no surprise that nearly half (46%) of CEOs believe tariffs will hurt their businesses, with another 36% saying it’s too soon to tell. The uncertainty—making long-term planning nearly impossible—is compounding the strain on retailers, who were already facing cooling consumer spending. That leaves retailers in an increasingly vulnerable position.

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