Trump tariffs push consumer sentiment to lowest level since 2022
President Trump's escalating trade wars have shaken confidence in the economy among Americans across the political spectrum, according to survey results released Friday.
The University of Michigan's Consumer Sentiment Index plunged 10.5 percent to 57.9, according to preliminary results. That marks the lowest level for the index since November 2022, when it dipped to 56.7 amid steep inflation and aggressive Federal Reserve rate hikes.
"Many consumers cited the high level of uncertainty around policy and other economic factors," said Joanne Hsu, director of the Michigan surveys of consumers.
"Frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences."
The Michigan consumer sentiment index, which is closely watched by Wall Street, has fallen in three consecutive months since January and is down 22 percent from 2024.
Declines in consumer confidence were widespread across age, income, education, demographic and regions of the U.S., Hsu noted.
Confidence in the future of the economy also declined across political groups, Hsu added, a notable shift from a growing trend of partisan influence on economic sentiment.
Economic expectations among Republicans fell by 10 percent in March, Hsu noted, despite a surge in sentiment following Trump's election. Independents reported a 12 percent decline, and economic expectations plunged 24 percent among Democrats.
The Michigan survey results are the latest red flag for Trump, who has pushed forward with an aggressive tariff agenda despite increasing concern among economists and policymakers.
Trump this month imposed 25 percent import taxes on goods from Canada and Mexico, but delayed much of those new tariffs over the past two weeks. The president's new tariffs on steel and aluminum have also taken effect, igniting another trade battle with the European Union.
Trump on Thursday threatened to impose a 200 percent tariff on wine, Champagne and other alcohol from Europe if the EU did not revoke a new import tax on U.S. whiskey.
The EU is set to allow expired tariffs on U.S. goods, which the bloc imposed during its last trade battle with Trump, to return April 1. The EU also plans to impose new tariffs on $28 billion in U.S. goods by mid-April.
Trump is also set to impose reciprocal tariffs on foreign goods from countries that have imposed similar duties on U.S. products.
Trump's escalating trade wars are expected by economists to raise the costs of key goods — including food, energy and clothing — as Americans attempt to recover from years of high inflation.
Retaliatory tariffs against U.S. goods are also expected to take a heavy toll on American farmers, who lost billions of dollars in sales during Trump's first-term trade wars with China and the EU.
The potential costs of tariffs and Trump's frequent changes have also spooked business leaders, who said the constant uncertainty around trade policy makes long-term planning difficult.
"If consumer sentiment continues to sour, spending will likely follow it lower and the economy could take a substantial hit," wrote Bill Adams, chief economist for Comerica Bank, in a Friday analysis.
"And don’t hold your breath for the Fed to ride to the rescue if plunging consumer confidence hits spending at the same time that inflation expectations are soaring."
Inflation expectations among consumers skyrocketed in March, with the year-ahead inflation prediction rising from 4.3 percent to 4.9 percent, the highest reading since 2022.
Long-term inflation expectations also surged from 3.5 percent to 3.9 percent, the steepest one-month increase since 1993.
Rising inflation expectations could be a major concern for the Fed as it plots further interest rate cuts this year.
The Fed is amid bringing interest rates down from the peak set during the height of its battle with inflation. But higher prices driven by either tariffs or concerns about them could keep the Fed from easing pressure on the softening economy.
Amid weeks of falling stock prices, the Trump administration has tried to reassure Americans in its agenda while tamping down fears of a recession.
The president and his top economic officials have argued that the economy is going through a transition period toward a stronger domestic job market and U.S. manufacturing.
"Our Economy will BOOM, like never before!," Trump wrote on Truth Social, his social media platform, Friday morning.
Trump and Republicans have also blamed the Biden administration and Democrats for the current state of the economy, even after inflation eased, and the job market improved in 2024.
Heather Boushey, a member of Biden's White House Council of Economic Advisers, put the blame back with his successor.
"In just a few weeks, the Trump Administration, with Elon Musk in the driver's seat, has managed to see Americans sharply lower their expectations. Instead of seeing better economic times ahead, more Americans are anxious that the strong economy of the past four years is now being undermined by the chaotic mismanagement and chainsaw economics of this administration," she said in an analysis.
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