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

Washington, D.C. — With the holiday shopping season fast approaching, market watchers are closely monitoring U.S. trade policy for signs of relief. UBS Chief Economist Paul Donovan believes President Donald Trump may deliver an unexpected seasonal gift: delaying or rolling back tariffs on key consumer goods in a bid to avoid disruption to Christmas spending. Donovan’s remarks come amid mounting economic pressure and ongoing U.S.–China trade uncertainties.

Tariff Relief Could Be Santa’s Surprise

UBS’s Paul Donovan suggested that the Trump administration may be motivated to ease tariffs temporarily to support consumer confidence and holiday retail sales. “The U.S. consumer is the backbone of this economy,” Donovan noted during a client call on Monday. “Disrupting their spending patterns with higher prices right before the biggest retail season would be politically risky. A strategic delay could be framed as putting ‘America first’ while also ensuring Christmas isn’t canceled.”

Tariffs enacted under Trump's first term largely focused on imports from China, including toys, electronics, and apparel—products that dominate holiday shopping lists. A significant portion of these goods are imported between July and October, making tariff schedules particularly impactful for retailers’ bottom lines and consumer prices.

Retail Sector on Edge

Retailers have been cautiously optimistic, hedging their bets with early inventory stockpiles and overseas sourcing shifts. However, any signal of a tariff delay could boost sentiment, particularly for mass-market brands reliant on affordable imports.

Matthew Shay, President of the National Retail Federation, weighed in: “Retailers need predictability. The last-minute nature of trade decisions has been a thorn in supply chain planning. If the White House provides clarity on tariffs before peak season, it could be the boost the industry needs after several volatile years.”

Retail stocks, including Walmart (NYSE: WMT), Target (NYSE: TGT), and Best Buy (NYSE: BBY), saw modest gains after UBS released its commentary. The SPDR S&P Retail ETF (XRT) rose 1.2% in Monday trading.

Political Calculations at Play

Analysts suggest the move isn’t just about economics—it’s also a strategic political play. With Trump eyeing a strong showing in suburban swing states ahead of the 2026 midterms, any economic strain on average households could have electoral consequences.

“Trump is a marketer at heart,” Donovan said. “Positioning himself as the protector of American families and Christmas traditions fits his narrative. He could suspend tariffs in a way that appears magnanimous while actually serving political and economic interests.”

Such maneuvering would not be unprecedented. In August 2019, Trump delayed tariffs on smartphones, laptops, and toys until mid-December, citing concerns over holiday shopping.

Impact on Inflation and Consumer Prices

From an economic standpoint, a tariff delay could also help contain inflation, a persistent concern for the Federal Reserve. Core inflation in the U.S. has moderated but remains above the Fed’s 2% target. Higher import costs, especially on consumer goods, could reignite inflationary pressures at a delicate juncture.

“Tariffs are a form of consumption tax,” said Megan Greene, Senior Fellow at Harvard Kennedy School. “Delaying them at a time when households are already stretched by interest rates and housing costs could help prevent demand destruction during the holidays.”

China Trade Talks: A Wild Card

The potential for a tariff pause also ties into the broader context of U.S.-China trade relations. Although formal negotiations remain on hold, backchannel discussions have reportedly resumed, with both nations exploring confidence-building measures.

“There is no guarantee that delaying tariffs would lead to a broader deal,” cautioned Donovan. “But it could lower the temperature enough to resume talks without either side losing face.”

Beijing has also hinted at the possibility of easing its own restrictions if the U.S. shows flexibility. A mutual tariff delay could pave the way for a phased reset of trade relations, albeit with continued strategic competition in other areas like semiconductors and green technology.

Investor Outlook: Cautious Optimism

Markets remain cautiously optimistic. The S&P 500 has gained nearly 7% over the past month, buoyed by cooling inflation data and strong Q2 earnings projections. A tariff delay could further support equities, particularly consumer discretionary and retail stocks.

“Investors are looking for any sign of policy predictability,” said John Stoltzfus, Chief Investment Strategist at Oppenheimer. “If Trump signals a pause on tariffs, it could inject some seasonal cheer into the market narrative and strengthen the rally into year-end.”

However, Stoltzfus warned that the broader macro environment remains fragile. “Geopolitical tensions, Fed policy, and global demand are all variables. The tariff issue is just one piece of the puzzle.”

While it remains to be seen whether President Trump will indeed “save Christmas” by delaying tariffs, the mere possibility is enough to stir speculation on Wall Street and Main Street alike. As UBS’s Donovan highlights, such a move could serve both economic stability and political strategy, especially in a time when consumer confidence is vital to sustaining momentum.

The final decision could come within weeks, as importers finalize holiday shipping schedules and policy advisors gauge the political winds. Until then, markets will watch closely, hoping that trade policy brings more gifts than Grinch-like surprises.