US consumer sentiment plunges on tariff fears, inflation expectations jump
WASHINGTON — US consumer sentiment plunged to a nearly 2-1/2-year low in March and inflation expectations soared amid worries that President Donald Trump’s sweeping tariffs, which have ignited a trade war, would boost prices and undercut the economy.
The deterioration in sentiment and inflation expectations reported by the University of Michigan Surveys of Consumers on Friday was across political party affiliation, with consumers saying “frequent gyrations in economic policies make it very difficult for consumers to plan for the future.”
That mirrors similar concerns in some business surveys. The uncertainty created by Trump’s on- and off-again tariffs as well as an escalation in trade tensions risks derailing the economic expansion.
Fears of higher prices, which drove consumers’ long-term inflation expectations to levels last seen in early 1993, create a challenge for Federal Reserve officials as they consider the next steps for monetary policy.
“The jury is back and the verdict is in. Trump 2.0 policies are harming the economy and the future prosperity of America,” said Christopher Rupkey, chief economist at FWDBONDS. “The consumer is frightened and sees sharply higher prices ahead despite the assurances from Washington that trade tariffs are good for the economy.”
Worst since Nov. ’22
The University of Michigan said its Consumer Sentiment Index dropped to 57.9, the lowest level since November 2022, from a final reading of 64.7 in February. Economists polled by Reuters had forecast the index falling to 63.1.
The index has erased all the gains posted in the aftermath of Trump’s election victory in November.
The weakness in sentiment this month reflected a deterioration in expectations for the future across multiple facets of the economy, including personal finances, employment, inflation, business conditions and the stock market.
Republicans recorded a 10 percent drop in their expectations index, while Independents saw a 12% decrease. Expectations among Democrats tumbled 24 percent.
“Consumers from all three political affiliations are in agreement that the outlook has weakened since February,” said Surveys of Consumers Director Joanne Hsu.
Trump has slapped a raft of tariffs on a wide range of goods from key trade partners like Canada, China and the European Union, which have responded with duties of their own. Some tariffs have been imposed and then suspended for a month.
Tariffs were mentioned by 48 percent of the survey’s respondents and were expected to push up prices in the future. Consumers’ 12-month inflation expectations jumped to 4.9 percent, the highest level since November 2022, from 4.3 percent in February.
