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A Q&A with Stephanie Tully on Tariffs and the Consumer Mindset

A Q&A with Stephanie Tully on Tariffs and the Consumer Mindset

Associate Professor Stephanie Tully explains how perceptions of economic uncertainty are influencing how consumers spend and save.

by: Alexander Bernard
05.27.25
Stephanie Tully

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The federal government’s recent wave of import tariffs has set off economic ripple effects across global markets, with tariffs on Chinese goods climbing as high as 130%. These rapid policy shifts have left consumers uncertain, raising questions about the impact on everyday spending and how Americans can prepare for what comes next.

In this Marshall News Q&A, Stephanie Tully, associate professor of marketing, discusses the impact of tariffs and how consumers can be financially resilient despite a turbulent market.

Interviewer: How do you anticipate consumer behavior changing if tariffs result in a rise in prices?

Stephanie Tully: We’ve seen, at least in the last month or so, that the consumer sentiment index has gone down, which is a measure of how consumers are feeling about the economy as a whole. It actually captures both how they feel about their own personal situation, but also how they feel about the global economy, and we’re seeing that’s significantly down from what it was just a few months ago.

How does that affect people? Obviously people are going to start cutting back, especially on discretionary spending. Particularly, what I’ve found in my research and what seems to be going on now … is what gets hit is experiential spending. We’re much less likely to spend on experiential purchases when we’re feeling financially constrained or when we’re worried about our finances. The Beyoncé concert that was having trouble selling out, things like that, I think a lot of it can be explained by consumers being more worried about their financial situation.

How can consumers prepare for future economic stress?

ST: How can they and how will they are two different questions. Obviously there are things that we can do that will improve our financial situation that we probably could or should be doing all the time, regardless of the financial situation. We should be giving ourselves a buffer during times that are financially good so that we can withstand times that are more difficult. Obviously there’s a lot of people that are not in a situation where they can build that buffer now, and they’re more worried about making ends meet.

Cutting back on discretionary spending is probably not the worst idea. Cutting back on experiential spending as long as your wellbeing isn’t affected significantly is probably not a bad idea either.

One of the biggest things that we’ve seen people spending money on is eating out and eating out is incredibly expensive. Probably the best thing that consumers can do for themselves is learn to cook better.

Some are optimistic that companies may eat the costs of inflation for a while. Is it reasonable or even feasible that companies would not pass these expenses onto their consumers through price increases?

ST: In the long term? I don’t think it’s at all practical — especially if we’re dealing with stakeholders. They’re not going to say, “Yeah, that’s fine. We’ll deal with a decrease because of the tariffs.” That’s not going to happen.

In the short term, companies could gamble on the idea that it will bring in enough business because of the goodwill it creates. That’s not practical for public companies, but for private companies, it is possible that they’ll try to take a stand and say that they don’t want it to affect the customers. In the long term, they also need to pay their bills, they also need to pay their workers. The money has to come from somewhere, and I don’t think it’s realistic to expect that companies are just going to eat this themselves.

What would you say is the biggest misconception around inflation and consumers?

ST: The biggest misconception is that it’s talked about on a monthly basis or a yearly basis: “We’re up from last month, we’re down from last month, we’re up from last year, we’re down from last year.” In reality, consumers don’t update in that same fashion. They don’t think, “Oh, egg prices are only up 2% from last year.” They have a much longer memory for what things should cost.

It’s that old story where your grandfather tells you about how milk used to cost 25 cents. You have these prices that get stuck in your head that you’ve had for years and years. In periods of inflation, we as consumers don’t update on a regular basis even if it goes down. Even if prices were to go down a little bit, it doesn’t feel cheap to us because we haven’t gotten used to the increase in the first place. It’ll still feel expensive no matter how long it stabilizes for or if it goes up and down in short periods. We’re just going to focus on the fact that it all feels expensive to us.

From your perspective, what are the key traits of financial resilience?

ST: There are two pieces to that. One is there are some consumers who create buffers for themselves so they have more liquid assets. If you have money tied up in a house, it’s really hard to use that. But if you have money tied up in the stocks or in a certificate of deposit or a savings account, it is much easier to get that money when times get difficult. So the consumers who have more of that available to them are going to be more financially resilient when things get difficult.

The other part is adapting, and that’s hard in the short term. To cut back on spending feels aversive to us. We don’t like to do that. There’s research showing we’d much rather make more money than cut back on things. You might see Uber drivers driving more often or you might see people trying to take on small gig work more often as a function of this. But I think resilient consumers will recognize the importance of cutting back or changing their spending habits as well. The good thing is that if we can get into new habits, cutting back is really short-term pain because humans are actually really adaptable.

We get on this “hedonic treadmill.” Things are aversive at first, and then we get used to it. Or, things are great at first and then we get used to it, and it’s just daily life. The consumers who are resilient are the ones who can stomach changing those fixed expenses, lowering those costs, and getting a cheaper car when their lease is up.

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