Young consumers especially feel the brunt of tariffs

From fashion and beauty products to tech gadgets and collectibles, young consumers are avid shoppers. According to a recent study, Gen Z (currently ages 13-28) has a $1.5 – $2 trillion annual spend globally, while millennials (now ages 29-44) have an estimated $3 – $4 trillion annual spend.

This spending momentum, however, could be impacted this year by the Trump administration’s introduction of tariffs, which have caused the prices of consumer goods and technology to increase to cover the additional tax on imports. Though the administration has been pushing for the importing country and businesses to cover the tax, there is still reason to believe prices will go up, which may impact young consumers more than older ones.

“Young people don’t yet have the income to pay a lot of taxes,” said Matt Stephani, president of Cavanal Hill Investment Management, Inc. “So, the tariffs may disproportionately have a negative impact in that they are paying higher costs for goods but not reaping the rewards the tariffs will reportedly bring in the form of income tax cuts.”

These higher costs are already being reflected in some prices. For example, when the Trump administration announced a 120% tariff on products from China, online fast fashion giants Shein and Temu responded by hiking prices for American customers by up to 377%. A couple of weeks later, President Trump announced a 90-day tariff pause, leaving many businesses uncertain about the future.

So how will this impact young consumers who have grown accustomed, even addicted, to low-cost clothing and consumer goods? While the current administration rationalizes that tariffs will balance the trading landscape and contribute to reducing government debt, thus lowering taxes for Americans, will younger shoppers see the benefit? Time will tell.

A shift in spending habits
Reports have shown that while younger consumers are part of the consumer goods economy, millennials, in particular, often prefer experiences over possessions. Stephani sees that trend amplifying with tariffs, making once-cheap goods more expensive.

“People will likely start saying, ‘I’m going to substitute this now higher-priced item for something else. It could be a lower-cost product, or they could choose to do something else with their money like spend it on services or experiences,” said Stephani. “So instead of buying clothes, they might go to concerts or add a streaming service to their digital devices.”

He added that a shift to locally based services and experiences would be expected to benefit the local economy by circulating money back through local communities and the U.S. economy.

Impact on influencers and content creators
Meanwhile, young stars have been born in the form of content creators and influencers on social media over the past two decades. A recent report revealed that one in three young people shop on social media every week, as they follow similar-aged content creators who post on platforms such as TikTok, Instagram, and YouTube, recommending products and earning a percentage of sales. Some influencers build entire businesses around making deals with brands to promote their products to their large online following.

So, what happens if the goods they are promoting are suddenly more expensive and their followers stop buying? Business analysts are already seeing the impact as brands pull back on marketing budgets to cut expenses, with influencer partnerships being among the first on the chopping block.

“How much will brands be willing to continue to pay influencers to advertise their product if the product isn’t moving at the same velocity as it used to?” questioned Stephani. Increased prices could mark the end of long-popular “haul videos,” and content creators may need to shift to promoting more local goods and services, he noted.

The secondhand market
Another change in spending habits can be seen in the increase of shoppers in secondhand markets, such as thrift stores, Goodwill and eBay, particularly among young people. A recent study by Capitol One Shopping Research reported that 83% of Gen Z buyers have purchased or are interested in buying secondhand clothing. Meanwhile, 64% look for a secondhand item before buying new, and 34% always shop at thrift stores.

More people are also increasingly interested in renting clothes rather than purchasing them. Sites such as Rent the Runway, Nuuly and Armoire let fashion-hungry consumers borrow and return clothes based on a subscription model. This also aligns with the values of younger generations who strive to live and shop more sustainably. Alternatives to buying directly from stores and brands may be a silver lining, as higher prices resulting from tariffs could put an end to fast fashion, which has historically been damaging to the environment.

“I think higher prices are going to reduce the quantities that people buy,” said Stephani. “Much of the fast fashion was worn only two or three times before being pushed to the back of the closet or given away. Young people will likely buy less because it is more expensive. They only have so much disposable income.”

Young people are accumulating belongings
Looking forward, as young people reach milestone periods of growth, such as starting first jobs, attending college, and moving into first apartments, their spending may not always just be “wants,” but “needs.” And if they aren’t yet established enough in their careers to afford an independent lifestyle, it may be the parents covering those costs and getting hit with higher prices.

“Parents will likely be less willing to pay for goods when the price climbs substantially. When they were buying an $8 shirt, it wasn’t a big deal, but if it suddenly goes up to $21, they’re going to hesitate,” said Stephani.

Although we still have to wait and see where tariffs ultimately land, there is little doubt that they will push prices higher on most consumer goods. There is only so much the exporting country or businesses may be willing to “eat,” no matter how much the Trump administration calls for it. And with that, young consumers are likely going to look elsewhere for their shopping needs.