Smart Spending or Survival: The Hidden Story Behind Steady U.S. Consumer Behaviour
This weekend, the Wall Street Journal seemed surprised by the continued strength of U.S. consumer spending, even in the face of rising economic uncertainty. (WSJ) However, what they may have overlooked is that consumer behaviour has actually been pretty consistent since the election. People are smart — they’re aware of the potential impact tariffs can have on everything from consumer goods to food and groceries, and they’re acting.
If you’ve had to replace a 30-year-old fridge or a worn-out piece of electronics, you probably did so months ago, knowing full well that prices would rise as tariffs on imports like aluminium and electronics started to kick in. It was a strategic purchase, not a reactionary one. Consumers who paid attention were making sure they locked in those purchases before prices went higher.
Similarly, when grocery bills start creeping up because of the impact of tariffs on aluminium and food packaging, many people know exactly how to deal with it. We've seen this movie before. When tariffs were introduced in 2018–2019, it wasn’t just the big-ticket items that were affected; everyday items saw price increases too, and people responded by stocking up on non-perishable goods. It's just smart to do so — prepare now, avoid higher prices later. (Brookings)
But here’s the real story: the worst of the tariff impact is yet to come. In the next few weeks, we’re going to see the ripple effect. As shipping volumes from China start to slow down, the trickle-down impact on supply chains and logistics will begin to hit. Goods that were once readily available will take longer to arrive, and prices will reflect that. Retailers are already bracing for a slowdown, and industries that rely on quick turnarounds are going to feel it the hardest.
And while consumer spending may seem stable on the surface, let’s not be fooled: this isn’t necessarily a sign of economic confidence. In fact, much of the spending right now is driven by consumers preparing for the impact. People who can afford to stock up are doing so — especially in anticipation of higher prices on the horizon. But what about the SMEs who don’t have the financial cushion to plan? What about those small businesses already operating on tight margins? The reality is that they’re going to feel the pinch far more acutely when these price hikes hit and supply chains struggle to catch up.
Warren Buffett once said, "If you really want to see what’s happening with consumer spending, look at hairdressers." People will spend money on their haircuts when they feel confident. When they don’t, they cut back. This is true across the board. For consumers who are financially comfortable, they’re going to keep spending — and even stockpile. But for the rest, especially those who don’t have disposable income to weather the storm, it’s going to be a lot tougher. (CNBC)
The truth is that the steady consumer spending we’ve seen lately isn’t telling the whole story. It’s people preparing — and those who can’t afford to do that will be left exposed as we see more disruptions in supply chains and rising prices. The people most vulnerable right now aren’t just consumers; it’s the SMEs struggling to manage cash flow in a climate of economic uncertainty.