Jamie Spencer
The Trump bump in consumer sentiment has turned into a slump.
Americans are growing increasingly worried over President Donald Trump’s escalating and unpredictable trade war, according to the latest University of Michigan consumer survey released Friday. Sentiment dropped 11% this month to 57.9, down from last month’s 64.7, marking the lowest level since November 2022.
Tariffs Spark Economic Uncertainty
The Trump administration’s erratic tariff rollout has fueled uncertainty. Earlier this month, Trump imposed 25% tariffs on Mexico and Canada, only to delay them after business leaders voiced concerns. Then, after U.S. tariffs on steel and aluminum took effect Wednesday, the European Union and Canada swiftly retaliated with their own duties.
Market volatility has intensified as a result, making it harder for companies to plan ahead and sparking inflation fears. Americans’ expectations for inflation in the year ahead jumped to 4.9% from 4.3%, the highest since November 2022.
“Many consumers cited the high level of uncertainty around policy and other economic factors,” said Joanne Hsu, the survey’s director. “Frequent gyrations in economic policies make it very difficult for consumers to plan for the future.”
Signs of Economic Weakness
The tariff-induced turmoil comes as the U.S. economy shows signs of slowing. Consumer spending declined in January for the first time in two years, and home construction plummeted. Major companies like Target, Walmart, and Delta Air Lines have warned about stretched consumers.
A closely watched Federal Reserve Bank of Atlanta forecast predicts the economy will contract 2.4% in the current quarter. Trump did not rule out a possible recession in an interview aired Sunday, triggering a major Wall Street selloff.
Fed Faces Tough Decisions
The Federal Reserve is set to meet next week to assess the economic outlook. Inflation expectations are rising due to tariffs, creating risks of stagflation—a scenario where growth slows while inflation rises.
“You essentially have opposing forces in the economy,” said Tom Bruce, macro strategist at Tanglewood Total Wealth Management. “With tariffs, you have the threat of higher prices; with declining sentiment, businesses may cut investments, further slowing growth.”
Fed Chair Jerome Powell recently emphasized that the central bank’s response will depend on the overall impact of Trump’s policies, which also include mass federal layoffs and a crackdown on immigration.
“It’s not simply what’s happening with tariffs,” Powell said. “It’s about how these broad economic policy shifts impact overall growth.”
