Trump might save Christmas with tariff delay, UBS’s Donovan says

Avoiding a tariff hit during the shopping-heavy end-of-year period could avert the worst of any adverse headlines for the White House, a prospect analysts foresaw in May after gauging the impact of Trump’s initial round of tariffs.

Donald Trump’s delay of tariff increases until Aug. 1 may have just softened the price impact for Christmas by pushing it into 2026, according to UBS Group AG Chief Economist Paul Donovan.

Speaking on Bloomberg Television, he said the 10% levy affecting all trade will drive higher inflation numbers in July and August, but extra duties applied to specific countries under the US president’s policies may not now affect shoppers until much later.

“By the time you’ve got the goods shipped to the United States, you’ve got through the supply chain, given that a lot of retailers obviously order early for Christmas,” Donovan said. “That’s obviously something that will lessen some of the damage to US consumers in the second half.”

Avoiding a tariff hit during the shopping-heavy end-of-year period could avert the worst of any adverse headlines for the White House, a prospect analysts foresaw in May after gauging the impact of Trump’s initial round of tariffs. Donovan warned that ultimately, any delay won’t prevent the full impact from reaching American households.

“This is a big tax burden being placed on the US consumer,” he said. “By the end of this year, real inflation-adjusted wages are going to be going down, not up, and that’s when we’re going to start to see some of the problems really kicking in.”

Donovan outlined a scenario where consumers first rely on credit cards and savings before then cutting down on spending. Meanwhile the speed and extent of fallout on inflation may depend on how far retailers seek to profit from anticipated tariff-related price increases.

But plenty can still change, not least regarding whether the White House sticks to its policies.

“We have to assume that Trump will retreat, because that’s his modus operandi,” Donovan said. “I think that as you start to hear cries of anguish from US corporates and consumers, you’ll start to see retreats on some of these issues.”