Retailers ramped up orders in early 2025 in anticipation of the tariff turmoil to come. But they appear to have changed tacks even as the confusion surrounding trade policy persists.
According to newly released data from Wells Fargo Supply Chain Finance, goods financed from foreign suppliers through April 2025 increased 13 percent year over year—an indication that importers were hoping to head off disruptions spurred by new duties. After President Donald Trump’s “Liberation Day” tariff announcement on April 2 and the May 12 extension of a pause on duties on China-made goods, however, the U.S. goods and services deficit shrunk substantially, indicating a contraction in imports.
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In June, the deficit fell to $86 billion from $96.4 billion the month prior, with foreign imports dropping by $11.5 billion month over month, according to data from the U.S. Census Bureau and the Bureau of Economic Analysis. The March-to-May inventory growth spike was in effect a blip, the group’s reporting showed.
While retailers rushed to bring in inventory under the wire this spring, they’re behaving more cautiously now as they look to the fall and holiday seasons, Wells Fargo analysts said during a webinar on Wednesday. A sizable contingent have sought to delay purchases while they wait for clarity on the state of America’s trade relationships, while other have selectively front-loaded seasonal goods to avoid overstocking lower-margin products and stuff that might not sell.
Now that post-tariff-hike shipments are flowing through America’s ports of entry, companies are crunching the numbers to balance higher costs, consumer demand and inventory levels with the goal of shielding shoppers from tariff impacts. They’re working with their suppliers and players throughout the value chain to mitigate the effects of heightened expenses.
“Retailers are evaluating their cost structures to avoid passing excess price increases on to consumers with the expectation for pricing adjustments to be methodical and specific to certain items versus a broad-brush approach,” the report said. “Meanwhile other retailers are holding prices steady by cutting capital expenditures or freezing hiring.”
Wells Fargo retail finance managing director Adam Davis noted that while retailers have started to sell through the stock they frontloaded. Since then, inventory buying has normalized on a year-over-year basis.
With fewer goods coming in ahead of the holiday season, stores could be less stocked than usual. “It’s not going to be the extreme that there’s going to be empty shelves—I think that’s more of a headline,” he said. “I think it’s more that retailers do not want to be over-inventoried,” especially with goods that cost more than they did to import a year ago.
“You don’t want to be in a situation come Q1 of next year where you’re forced to highly promote and sell through that inventory at heavy discounts when the cost of goods is already pretty high; you’re effectively just going to be losing a lot of money,” he said.
Rather than bringing in inventory indiscriminately, “what we’ve seen with the retailers is that they are taking a very methodical approach,” Davis said. They’re developing a “blended” assortment of items—some that will sell at high margins, and others that won’t. Why? “They’re afraid of where the consumer is… the consumer is still resilient, but we do see some type of caution.” Not every sale can be a margin win.
“There’s still a fair amount of pent-up demand with the consumers,” Davis continued, pointing to July’s better-than-expected performance. “Everybody’s quoting anxiety around tariffs, and I think what we saw in July was just a pull forward of sales. A lot of that is back-to-school… I think what’s happening with the consumer is they are they’re going to be looking for those promotions, and they’re going to jump on them as soon as possible.”
Shoppers will spend when they see a good deal for fear that it might not be available once the tariff impacts truly ramp up, he believes. He expects to see retailers “trying to get the inventory in early, putting them on the shelves early, trying to attract the consumer as early as possible to take advantage of that budget that the consumer might have if they’re constrained.”
But there’s no way that retailers can move away from sales this fall, especially when shoppers have become conditioned to expect them. “Fall has become such a promotional environment, as you think about how Black Friday has moved all the way to the beginning of November, and some of the anniversary sales that you see in September,” he said.
The retail finance director said Wells Fargo will be watching those promotions closely to analyze whether aggressive promotions reflect tariff-driven price increases.
Davis said he expects to see consumers’ trepidatious attitude toward spending continue, and for that reason, the last thing that retailers want to do is raise prices when they should be offering eye-catching deals. “Some of the retailers [are] saying, ‘You know what, we can’t increase the pricing as much to get back the loss we have on the higher cost of goods, but what we can do is start cutting some of our operating costs, some of our investments.’ And so they’re trying to take a bottom-line approach, versus just the margin line.”
According to Wells Fargo Supply Chain Finance, many companies are ordering conservatively to manage working capital and shield themselves from exposure to the volatility of import costs. June data revealed steady invoice financing volumes, “suggesting cautious optimism,” and notably, China trade volume through the first half of June 2025 almost surpassed all of June 2024, showing that some firms are dipping a toe back into sourcing from China “but the overall scale does not reflect aggressive restocking.”
The group’s head of global originations, Jeremy Jansen, said China-plus-one strategies are again gaining traction, noting that retailers that prioritize agility rather than rigidity in their sourcing models will be better positioned to withstand the pressures of demand spikes, delays in restocking, higher freight costs and other logistical challenges.
According to Jansen, Wells Fargo Supply Chain Finance clients “learned many valuable lessons” in 2018 and 2019—when Trump’s Section 301 punitive duties on China came into play—“about diversifying the supply chain.”
“I believe, prior to [2018], roughly 22-23 percent of all imports into the U.S. came out of China. That’s now 12-13 percent as U.S. importers and buyers learned to diversify their supply base, and we continue to see that. They have a playbook from 2018-2019 that they used, and I think it’s a lot more of the same in that regard.”
The firm has seen “a relatively robust increase in certain parts of Asia Pacific in shipment and financing activity, especially India, Korea, Malaysia,” he said. “China has been very flat over the last 90 days in terms of the invoices that we’re financing for the product that’s making its way to the U.S.”
While American retailers are making moves to shore up their supply chains and not get caught with too much or too little product, he doesn’t see the situation as a mad scramble. “Over the last I would say 60 days, there’s been more calming out there as the tariff picture starts to get a bit clearer,” Jansen said.
