The 2025 holiday season is shaping up to be a challenging one for local retailers. While consumer interest remains strong, the real hurdle isn’t demand, it’s navigating the cost uncertainty created by shifting trade policies.
For business owners in retail, the numbers tell a clear story. The products that drive holiday sales are overwhelmingly manufactured overseas. About 95% of toys, 98% of footwear and more than 90% of clothing are imported. Even seasonal décor and household items come primarily from China, Vietnam, India and Mexico.
This isn’t news to anyone who’s managed inventory, but what’s different this year is the unpredictability of what those goods will actually cost by the time they arrive.
Planning headaches
Retail operates on long lead times. Most businesses place holiday orders six to nine months out, locking in prices and shipping arrangements well before the first customer walks through the door in November.
This advance planning is what makes it possible to set competitive prices, plan promotions and manage cash flow.
But in 2025, frequent tariff adjustments across textiles, electronics and consumer goods have turned that planning process into guesswork. A shipment ordered in July might face entirely different duty rates when it clears customs in October.
For a business operating on thin margins, that kind of volatility can be the difference between a profitable sale and a loss.
Small business squeeze
Larger retailers have resources to hedge against these fluctuations like diversified supply chains, negotiating leverage and financial buffers. Independent stores don’t have those same tools.
When a sudden 10% or 20% duty increase hits, there’s often no way to pass those costs along quickly enough. The choice becomes absorbing the loss or cutting product lines entirely.
Many local retailers are responding by ordering conservatively with smaller quantities or with delayed commitments, and they are waiting for clearer guidance.
It’s a rational strategy that protects the bottom line, but it comes with trade-offs. Thinner inventory means less selection for customers and higher risk of stockouts — when a product is unavailable for purchase because the store has run out of inventory — if demand exceeds expectations.
What customers will notice
Higher retail prices are only one potential outcome of higher tariffs.
Other effects that may not be obvious at first glance will show up in other ways: fewer options on shelves, limited availability of popular items, back-orders that stretch into January and fewer aggressive promotions.
That popular toy or kitchen gadget a customer is counting on? It might sell out early with no restock until after the holidays.
Broader stakes
The holiday season isn’t just important, it’s critical for the retail industry. Nearly 20% of annual retail sales happen between November and December.
For many businesses, this quarter determines whether the entire year is profitable. Consumer spending drives roughly 70% of the U.S. economy, and the fourth quarter traditionally provides a major boost.
Similar to the supply chain difficulties during the pandemic, when supply uncertainty disrupts that cycle, the ripple effects extend beyond retail.
Logistics providers are adjusting capacity weekly instead of quarterly. Warehouse operations are more complex. Shipping schedules have become erratic.
Each added complexity raises costs throughout the system.
The long view
Some businesses are already adapting for future seasons. Diversifying manufacturing sources, exploring nearshoring options and building in more flexible supply arrangements are all strategies that can provide greater resilience over time.
But they don’t solve this year’s immediate challenges, and they often come with transitional costs of their own.
From a policy perspective, tariffs can serve legitimate strategic purposes, but their effectiveness depends on predictability. Businesses can adapt to higher costs if they know what those costs will be and have adequate time to plan.
It’s the uncertainty, especially around timing and scope, that undermines both planning and confidence.
For retailers, the focus this holiday season will likely be on proven sellers rather than experimental inventory, maintaining margins rather than chasing volume, and managing cash flow carefully. Some may pivot toward services or experiences, which face fewer trade-related complications.
For consumers, shopping earlier rather than later may be the wisest strategy. Waiting until mid-December could mean facing limited selection and longer wait times.
Looking ahead
The core lesson from 2025 is one local business owners already understand: in an interconnected economy, even distant policy decisions have immediate local impacts. Trade policy affects what products are available, when they arrive, and what they cost.
For now, flexibility and quick reaction to the current day’s developments will be the keys to navigating an unpredictable season.
The businesses that weather this period the best will be those that adapt quickly, communicate clearly with customers, and maintain focus on the fundamentals that have always mattered: service, reliability and community trust.
Ken Wasylik is the founder and managing director of E.M. Wasylik, an international business development company based in Waunakee. He also serves on the Wisconsin District Export Council and is a past president of the Madison International Trade Association.
Interested in offering leadership guidance to IB Madison readers? Email Katie Dean at katie.dean@ibmadison.com to be considered for this column.
