The Supply Side: Consumer prices may remain elevated in 2026

Many retail suppliers have raised consumer prices in 2025, claiming higher operating costs because of tariffs and rising labor and insurance costs. There is hope a U.S. Supreme Court ruling will bring some clarity with respect to tariffs implemented by the Trump administration.

Discount retailers have somewhat shielded consumers from the full effects of tariffs on everything from chocolate candy to sneakers through 2025. Walmart Chief Financial Officer John David Rainey said the brunt of the tariffs has been dealt with. But President Donald Trump has signaled that he is not backing away from tariffs.

The recent 6-3 Supreme Court ruling repealed the Trump-imposed tariffs under the International Emergency Economic Powers Act. The ruling did not cover tariffs Trump has levied on imports of steel, semiconductors, aluminum, and other products related to national security. Tariffs levied under Section 232 of the Trade Expansion Act of 1962, which include drugs, food, furniture and automobiles, were also not impacted by the ruling.

Economists had predicted consumer prices would increase this year because of the tariffs. Much of that forecast was based on rising personal consumption expenditures reported Feb. 20. The PCE reading increased 2%, the most since the pandemic, and an indication that consumers are spending more on goods and services relative to their incomes.

Economists continue to think prices will remain elevated amid the next round of tariffs. Trump vowed to impose a 10% global tax to replace the lost revenue from tariffs struck down by the U.S. Supreme Court. Trump also plans to expand that to 15% with additional congressional assistance.

Andy Laperriere, head of U.S. policy research for Piper Sandler, said tariffs will remain, and there will be more complexity for businesses as the exact tariff amounts fluctuate. Stacey Widlitz, president of SW Retail Advisors, said the court ruling gave retailers “the certainty of uncertainty,” which is one of the hardest metrics for them to maneuver.

“Many of the price increases already taken are sticky; prices are not going to come down,” she said.

Walmart said households earning $50,000 annually were making smaller purchases and more trips tied to their paycheck schedules. The retailer also reported weaker guidance than expected for this year, citing some wildcards with consumers.

HIGHER PRICES
Morningstar expects durable goods prices — electronics, toys, tools and small appliances — to rise 4.5% in 2026. The prices of non-durable goods such as apparel, textiles, food, paper and paper products are expected to increase by 5.6%, which will fuel inflation in the first half of 2026.

UBS economist Alan Detmeister said consumers enjoyed a break from price increases during the holiday shopping season, but companies are starting to raise prices, citing tariffs, higher wages and rising health insurance. Consumer-imported prices are up around 2.3% through mid-February, after retailers largely ended holiday promotions at the start of 2026, noted a report from Harvard Business School.

Columbia Sportswear executives said in an earnings call earlier last month that the retailer plans to raise prices for spring and fall merchandise by a “high single-digit percent.” The company also noted it has taken other steps to mitigate tariff impacts, including negotiating lower manufacturing costs and shifting overseas production to countries with lower U.S. tariffs.

Also in the apparel sector, denim company Levi Strauss recently cited the tariff impact in raising prices, noting in a January call with analysts that “we implemented additional pricing actions to further mitigate tariffs.”

Dana Telsey, CEO of Telsey Advisory Group, said high-end consumers are continuing to spend. She said they are being strategic about purchases, like buying second-hand luxury and also shopping at discounters more.

FOOD INFLATION
Food and consumables prices have remained high for several years, and most manufacturers raised prices well ahead of the tariff impacts. Data collected monthly by the U.S. Bureau of Labor Statistics found coffee prices increased 33% in January compared to the prior year. Bananas, which are largely imported, have remained close to the same price as a year ago, and bread prices are a bit cheaper year over year.

The Economic Research Service (ERS) forecasts that food prices are expected to increase 2.6% this year, which builds on a 2.9% increase in 2025 and a 2.3% gain in 2024. Beef and veal prices are predicted to increase 9.4% in 2026, and chicken prices are expected to increase up to 1%. Fresh vegetable prices are pegged to increase 2% in 2026, while fresh fruit prices are expected to remain steady. Eggs are the only food category expected to see price reductions.

Hershey’s is raising prices by at least 10% this year due to high cocoa prices. The company shrank package sizes in recent years to avoid hiking prices. Canned foods are also expected to be more expensive due to tariffs on steel and aluminum. Soup maker Campbell’s said tariffs will account for about 4% of the cost of goods for 2026.

“Consumers continue to be increasingly deliberate in their food choices,” Campbell’s CEO Mick Beekhuizen said.

The uncertainty of a constantly fluid tariff environment hinders forecasting, according to Boyd Evert, CEO of HRG, a deduction recovery firm in Bentonville. Jon Allen, CEO of Woodridge Group in Rogers, said, “uncertainty comes at a cost.” He said consumers can expect more price volatility with fewer promotions, which will likely keep prices elevated.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics.