Jack Kleinhenz, Chief Economist of The National Retail Federation (NRF) warns that persistent uncertainty surrounding U.S. trade policy and regulation is complicating forecasts for the retail sector, even as economic fundamentals remain relatively strong.
In the July edition of NRF’s Monthly Economic Review, Kleinhenz highlights a growing disconnect between solid data — including 3.9% year-over-year growth in core retail sales through May and a resilient labor market — and widespread anxiety over new tariffs, immigration policies, and economic legislation. He notes that while 2024 ended with strong 2.8% GDP growth led by consumer activity, 2025 has been marked by unpredictability.
“The year began with high expectations,” Kleinhenz says. “Since then, anxiety and confusion have taken center stage.” He emphasizes that many businesses are still trying to understand the scope and impact of tariff hikes, particularly how they might affect inflation and retail pricing in the months ahead.
Although tariffs have not yet translated into major consumer price increases, Kleinhenz cautions that sustained or expanded duties could curb spending and impact employment later this year. A surge in imports ahead of tariff deadlines led to a 0.5% GDP dip in Q1, but private sector demand has remained relatively strong.
Kleinhenz also addressed monetary policy, suggesting the Federal Reserve is unlikely to cut interest rates in July but could move in that direction this fall. Consumer “inflation psychology,” how expectations shape behavior, is being closely watched.
The review notes that while policy uncertainty remains elevated, recent legislation like the One Big Beautiful Bill Act “meaningfully reduces fiscal policy uncertainty” through permanent tax cuts for individuals and measures to induce more workforce participation.
NRF continues to monitor how these dynamics may influence retail growth in the second half of 2025. For more, visit nrf.com.
