Will Trump Tariffs Inflate Christmas Spending?

The Labor Day Weekend is over, marking the end of summer. Now we can get on to the next holiday in line… Christmas.

We used to concern ourselves with a few calendar markers over the fall, like Halloween and Thanksgiving, but current thinking renders these holidays obsolete.

Christmas is the Sole Survivor

Halloween celebrates evil spirits, and represents a bully mentality that demands candy in exchange for restraint from vandalism. We can’t have that. Besides, someone might get scared. Nope, only costumes of do-gooders that represent all-inclusive viewpoints without offense to people, animals, the environment, bugs, or extraterrestrials are allowed. These marching orders are enforced with rioting, hazing, hate speech and crying on college campuses, where irony is dead and the search for truth has left the building.

As for Thanksgiving, it’s a great story that currently exists under a cloud. A bunch of Europeans wash up on the shores of a land already occupied, celebrate the fact that they survived, and eventually overtake the natives. That’s a no-go under 21st century sensibilities, which we now use to judge all of history, an approach C.S. Lewis called “chronological snobbery.”

Which brings us to Christmas, a holiday under constant scrutiny for favoring one religion. It still gets a pass, but not because everyone agrees with the premise of joy. It’s about the time off and the gifts. While time off is never a bad thing, Corporate America loves Christmas because Americans get to leave work and shop. In fact, they’re encouraged to do so.

Christmas Gifts vs. Trump’s Tariffs

But that shopping is very specific. We tend to buy gifts that can fit under the tree. We don’t “give” people a free trip to the doctor or a year’s worth of yard mowing. And we shop high and low, online and off, for stuff, not services, putting a portion of our holiday merrymaking on a collision course with President Trump’s trade wars. As he turns the screws by increasing tariffs on goods from China, he makes the stuff we buy more expensive.

President Trump and his trade advisers tried to avoid this Grinch-inspired move by delaying the tariffs on a list of goods that normally fall under holiday shopping. Everything from sportswear to gaming consoles to cell phones get a pass until December 15. Looking for that perfect juice extractor with a self-contained motor for domestic use to give to Grandma? Don’t worry, it’s exempt from tariffs until the middle of December.

But the simple delay might not be enough to keep prices in check. Americans live on the “what’s next?” principle, and retailers are no different.

Part of the magic of shopping for the holidays is the joy we get from elbowing our fellow consumers to grab that last 600-inch television for 79% off. We love the deals, and have devoted Black Friday and Cyber Monday to celebrating them. If retailers know, and effectively communicate, that prices will jump after December 15 because of tariffs, then there’s a good chance they’ll forgo the normal discounting, or at least hold it to a minimum, ahead of the price hikes.

Such a move would boost holiday spending even if we don’t buy more stuff than we would have otherwise. It’s the same thing that happened in the second quarter on the wholesale side of America. Companies purchased materials ahead of higher tariffs, leading to increased business activity, at least for a while.

The Revenue Will Go to Uncle Sam

In the short run, the extra revenue will flow to the retailers who stock and sell the goods that we give as gifts. But if and when the tariffs become law, the additional cost will flow to a different bank account, that of Uncle Sam.

This might not be our first choice of where our money should go, but there’s no doubt the federal government needs the cash. The CBO just increased its estimate of the fiscal year 2019 deficit to $960 billion, and annual $1 trillion-plus deficits look likely for the next decade.

You can consider tariffs inflation or simply unvoted consumption taxes. If you want to avoid them on holiday shopping, get out early, and don’t wait too long to spend those gift cards.

Between now and then, I’ll be gearing up for trick-or-treaters and definitely celebrating Thanksgiving, just don’t tell anyone.