April’s CPI offered some relief: headline inflation slowed to 2.3% YoY, the softest since early 2021, and core inflation undershot for a third straight month. Yet beneath the surface, retailers are feeling the strain. Walmart posted $165.6B in Q1 revenue (+2.5%) with EPS beating forecasts, but profits dropped 13% YoY as tariff-driven import costs climbed. CFO John Rainey warned that price hikes on goods like bananas and car seats are coming by late May. With two-thirds of inventory sourced domestically, Walmart is partly insulated—but the remaining exposure is weighing on margins. For now, corporate America is absorbing the tariff pain per Trump's request.

‍

Sentiment Plunges as Tariff Fears Outrun the Data

‍

Consumers, however, aren’t waiting. Despite tame inflation prints, sentiment collapsed to 50.8 in May—the second lowest on record—as fear of tariff-driven price hikes took hold. Nearly 75% of respondents cited tariffs unprompted, and inflation expectations jumped to 7.3%, the highest since the early ’80s. This disconnect between perception and data is now driving behavior. Households are pulling back, with Walmart flagging weakened demand in key categories and suspending profit guidance due to volatility. The fear itself—rather than actual inflation—may now become a self-fulfilling drag on consumer demand just as we saw in 2022, when predictions of incoming economic "hurricane" never materialized but still changed behavior across businesses and consumers.

‍

‍

‍