When Americans are heading to the store, they seldom dwell on where their groceries or cleaning supplies were produced— let alone what tariffs might apply to trading partners and the impact it has on its cost. But a new analysis from the Federal Reserve Bank of Atlanta published last month leveraging Numerator’s household panel highlights whether consumers have consciously moved towards U.S.-made goods and if potential tariffs will impact everyday prices.
The analysis that leveraged Numerator data centered on two findings:
- Consumer spending on goods imported from China decreased due to supply chain diversification over consumer behavior.
- A 25% increase in tariffs on Canadian and Mexican goods and 10% increase on goods from China and other countries could impact prices on consumer goods tracked by Numerator by as much as 1.63%, assuming all tariff costs are passed onto consumers.
How does product sourcing influence consumer behavior?
In research independently conducted by Numerator, 40% of consumers say U.S. product origin is a key consideration when purchasing a product. But does that sentiment translate into their spending behaviors over the past several years?
A central finding from the Federal Reserve Bank of Atlanta’s study is that U.S. firms have reduced their reliance on Chinese imports in recent years. In 2018, approximately 49 percent of consumer spending (within Numerator’s coverage) went to companies with Chinese sourcing; by 2023, that figure had declined to 44 percent. This finding would have leaders assume that consumers are knowingly moving towards non-Chinese sourced brands. However, if Chinese sourcing for the brands identified was held constant in 2018, spending on Chinese-sourced products stayed consistent.
The data point to firms, rather than consumers themselves, driving this shift away from Chinese imported goods. After the 2018–19 trade wars with China, many businesses diversified supply chains to hedge against risks posed by tariffs. Additionally, data from a separate study conducted independently by Numerator shows that younger consumers– which are growing in spending power– are less likely to care about product origin. Only 19% of Gen Z say U.S. product origin is a key factor in purchasing ending February 2025.
This has two key implications for brands and retailers. First, they should prioritize mitigating future risk and preserving costs when shifting supply chains to non-tariffed countries, rather than aligning with consumer demand for U.S.-made goods. Second, those marketing products with “Made in U.S.A.” labels must highlight additional benefits of U.S. manufacturing beyond product origin—such as emphasizing lower costs or being more inflation-resistant.
How will tariffs impact prices and affect groceries and other consumer goods?
The study done by the Federal Reserve of Atlanta also finds that Canada and Mexico play a growing role in U.S. retail supply chains. In one scenario, the paper explores what would happen if tariffs on goods from these neighbors rose. Results indicate that an additional 10% tariff on Chinese imports, 25% tariffs on Canadian and Mexican imports and 10% tariff on other countries could cause price increases on everyday retail purchases, such as food and beverage items and general merchandise, covering about a quarter of the total consumption basket, by 0.81% to 1.63%, assuming half to full pass-through (i.e. the cost passed onto consumers).
Previous research identified by the Federal Reserve Bank of Atlanta indicates that import costs can adjust within about a month after new duties take effect, leaving companies and retailers with little choice but to factor in those higher costs when setting prices. The study notes that while some businesses may initially absorb part of the burden, extensive past experience suggests many ultimately pass on most or all of the added expense to shoppers. However, in a prior survey conducted by Numerator, 44% of consumers believe businesses should absorb some of the cost to keep prices stable for consumers creating tension between brands and their customers.
Future Implications for Brands and Retailers
The exact impact that tariffs have on prices depends on the scope and duration of any new taxes including retaliatory tariffs—and whether companies can swiftly pivot to alternate suppliers. The fact remains, though, that brands and retailers should expect increased costs and will need to keep an eye on how that affects their topline.
Brand and retail leaders must survey their purchase-verified shoppers to understand their sentiment and how they are adjusting their budgets as prices rise for certain goods. In our latest consumer sentiment survey, fielded in February 2025, Numerator found that 35% of shoppers plan to spend less overall to save money—an increase of 1.5 percentage points from the previous month. This comes with a significant decline in our financial outlook score, which dropped 3 points in our latest update. With consumer spending poised to shrink, brands will need to determine how they can stand out from their competitors and continue capturing their fair share.
In the current climate of economic uncertainty, businesses must be adaptable to maintain consumer trust and avoid revenue loss. Proactive measures such as adjusting pricing strategies, marketing, and supply chains will be essential. Promoting U.S.-made products, implementing smart promotions, and diversifying sourcing are all potential strategies to succeed in a tariff-heavy landscape. Reach out to our team of experts who can provide tailored insights and recommendations to help your business navigate these tariff challenges.
