Wholesale inventories stabilizing after stocking up for tariffs

The past year has been up and down for wholesalers. In their efforts to keep the country supplied with goods, they’ve dealt with tariffs and geopolitical strife, not to mention a whole bunch of wary retailers and consumers. 

But things might be settling down for some wholesalers. Preliminary data from the U.S. Census Bureau released Thursday showed that wholesale inventories ticked up 0.2% in December, compared to the month before. That’s essentially flat, just as it’s been for the last three months for which there is data.

Wholesalers don’t sell to consumers directly. But it’s important to keep track of how they stock their warehouses, said Jason Miller, supply chain management professor at Michigan State University, because they’re a huge chunk of this economy.

“The way I think about it is, is all of your retailers combined — so your Walmart, your Targets, your Amazons — they only have $800 billion of goods in inventory,” Miller said.

Wholesalers are holding more than $900 billion, he said.

“These are entities that are selling not only to retailers, but they're also selling a lot to manufacturers, they're selling to construction companies,” he said.

And early last year, they took on a strange new role, said Zac Rogers, operations and supply chain management professor at Colorado State University.

“Wholesalers were used as a human shield,” he said.

A shield from tariffs. Rogers said it was too expensive for retailers to stock up ahead of price hikes, so that job fell to wholesalers.

“Like you hold all this inventory, get it ahead of tariffs, and then when we're ready for it, we'll tell you,” he said.

Inventories swelled, then flowed out later in the year. Now, things seem slightly more stable.

“In 2026, the tariffs are there,” Rogers said. “They start on day one.”

With no major hikes to get ahead of, Rogers said wholesalers are back to doing what they normally do — trying to move product.

“We're seeing inventory pass through wholesalers very quickly so it can get to the retailers, so that they can sell it right away,” he said. “That's actually a big relief for wholesalers.”

That’s because all that warehousing was expensive. But Meagan Martin-Schoenberger, senior economist at KPMG, said carrying narrower inventories comes with its own set of risks, including in the event of a supply chain hiccup.

“You could potentially be opening yourself up to a disruption,” she said.

And now, with more wholesale goods imported with tariffs, she said the added cost could be passed through to retailers and consumers.

“I don’t think it’s gonna come all at once,” Martin-Schoenberger said.

But she said we could see a prolonged period of elevated inflation.