WASHINGTON: Clothing and home goods prices could rise between 4% and 10% if the ongoing conflict in the Middle East extends into the autumn and drives up fuel and fabric costs for manufacturers, a retail industry executive said.
While the clothing and home retailer has so far experienced little disruption to its supply chain, container ships are already facing delays of up to two weeks as they travel more slowly to conserve fuel, the executive said.
Those costs would escalate if the conflict persists for three months or more, with prices potentially beginning to rise by about 1% as early as June or July if disruptions drag on until then.
If the conflict continues into autumn, “there would be a more significant increase in prices” that retailers would need to pass on to consumers, the executive said, adding that his main concern was the price and availability of fuel for factories. He noted, however, that any increase was “unlikely to be as much as” 10%, given that retailers and suppliers would make savings to mitigate the impact.
A prolonged conflict could have a significant impact on consumer spending, the executive added.
Despite those risks, U.S. retail sales — including clothing — rose for the sixth consecutive month in March 2026, as higher-than-average tax refunds helped offset increased gasoline prices linked to the Middle East conflict, according to data released by the CNBC/NRF Retail Monitor.
Almost all retail sectors recorded year-over-year increases, with clothing stores, sporting goods stores, and health and personal care stores seeing the highest growth.
Clothing and accessories outlets posted a 0.57% monthly rise and a 10.89% annual increase. Shops selling sporting goods, hobbies, music and books rose 0.4% month over month and 10.88% from March 2025.
Retail sales excluding vehicle dealerships and fuel stations rose 0.4% on a seasonally adjusted basis in March compared with February, and grew 6.59% unadjusted from the same month a year earlier, the report showed. In February, those figures increased 0.28% month over month and 6.24% year over year.
When excluding restaurants, car dealers and gas stations, core retail sales saw a 0.41% monthly rise in March and a 7.05% annual increase. By comparison, February’s core sales were up 0.27% from January and 5.87% year over year.
Total retail sales for the first quarter rose 6.18% from last year, while core sales reported a 6.14% increase.
“Despite record-low consumer sentiment and the highest inflation rate in two years, consumers continued to spend on household priorities,” the report said. “As consumers focus on costs, retailers remain laser-focused on keeping prices competitive and affordable.”
However, the report warned that “a continued conflict, such as with continued high energy prices, will create inflationary pressure on a consumer who already has tough inflationary pressure.”
The outlook for retail prices is further complicated by the recent Supreme Court ruling that struck down President Trump’s International Emergency Economic Powers Act tariffs, which had been deemed unlawful. Those tariffs, imposed throughout 2025, had raised overall retail prices of imported goods by about 7 percentage points relative to the pre-tariff trend, according to a tariff tracker from Harvard economists.
The court’s decision eliminates nearly three-quarters of the tariffs Trump imposed in 2025, but what happens next to retail prices will depend on the extent to which those unlawful tariffs are replaced with new levies, the analysis said.
Tariffs can raise consumer prices in two ways: directly, through the increase in the import price itself, and indirectly, as firms and consumers switch to more expensive domestic substitutes. Academic studies show that during Trump’s first trade war in 2018, importers — not foreign exporters — bore almost all of the tariff costs.
The Harvard economists’ latest data through Feb. 10 show tariffs have raised retail prices of imported goods on average by 6.8 percentage points, and domestic goods by 4.8 percentage points. Clothing has seen a notably large increase of 17.5 percentage points.
Imported clothing prices have risen by more than 20 percentage points relative to the pre-tariff trend, while domestic clothing prices have risen only about 8 percentage points — indicating that tariffs themselves, not other factors, are driving the increases.
A recent analysis from the Federal Reserve Bank of New York found that about 94% of tariffs passed through to import prices.
“President Trump and those in his administration have insisted that consumers are not bearing any of the tariffs,” the Tax Foundation noted in an analysis. “But the latest data show exactly the opposite. We should expect any new tariffs that President Trump imposes to likewise burden consumers.”