Dive Brief:
- President Donald Trump’s increased tariffs on trade partners are expected to increase inflation, and, in turn, fuel economic uncertainty and curb consumer purchasing power in the near term, according to Deloitte’s Economics Insider report for April 2025.
- Worries about tariffs had dampened inflation projections even before Trump announced increases on April 2, according to the report. However, the hikes are slated to slow consumer spending growth if made permanent, Deloitte forecasts.
- If consumers tighten their pursestrings, the travel and hotel industries would undoubtedly feel an impact, experts shared with Hotel Dive earlier this month. Some companies have already downgraded their hospitality performance outlooks for the year ahead.
Dive Insight:
In the near term, tariffs are poised to raise inflation, which could lead consumers to frontload some spending this year, according to Deloitte. However, the hikes would also likely result in a consumer spending growth slowdown as purchasing power tightens into 2026.
Tariff fears had already dampened inflation outlooks ahead of the April 2 increases. In March, the Federal Open Market Committee forecast that core personal consumption expenditure inflation would be 2.8% this year, up from its projection of 2.5% in Q4 2024, the report detailed.
Heightened inflation, coupled with federal government spending cuts and tighter immigration, would take consumer spending growth from roughly 2.8% growth in 2025 to below 1% growth in 2026, Deloitte forecast in the report. From 2023 through the beginning of this year, consumer spending growth had steadily increased, the report shows.
If purchasing power is hit by high inflation caused by tariffs, travel budgets for both international and domestic visitors will be negatively impacted, hospitality pros shared with Hotel Dive earlier this month. The Global Business Travel Association, meanwhile, reported that nearly a third of global travel buyers expect business travel volume at their companies to decline in 2025. For hotels, this would result in decreased guest counts, hindering performance.
Earlier this week, Goldman Sachs downgraded its U.S. hotels RevPAR growth outlook to 0.4% in 2025 from its previous estimate of 1.4%, citing weakened consumer demand, Benzinga reported.
Tariffs could also exacerbate labor issues that hotels are already facing, experts previously shared with Hotel Dive. On Wednesday, Federal Reserve Chair Jerome Powell said that tariffs and other government actions will likely increase unemployment across U.S. industries and spur inflation for the remainder of 2025.
If rising concerns about economic policy persist, business investment in the economy and wider GDP growth will also be negatively impacted, Deloitte projects.
Deloitte previously reported in February that a post-pandemic reprioritization of travel would continue this year, despite rising costs and affordability concerns.
