WASHINGTON (AP) — President Donald Trump’s tariff threats are causing significant increases in public anxiety, potentially undermining his promises to bolster the U.S. economy, which is showing signs of weakening. The University of Michigan’s index of consumer sentiment fell 10.5% monthly in March and dropped 27.1% over the past year. The preliminary report released Friday indicates that consumers’ expectations of annual inflation rose to 3.9% from 3.5%, marking the largest monthly increase since 1993.
This decline in confidence coincides with a severe stock market selloff and downward revisions to growth forecasts by Wall Street economists, signaling possible repercussions for Trump. Declines were consistent across all demographic groups, according to Joanne Hsu, director of the survey, who noted that many consumers cited uncertainty about policy and other economic factors.
Even Trump’s core supporters are becoming slightly more pessimistic, with sentiment among Republicans dropping 3.2%. Democrats and independents experienced even sharper declines in confidence as tariffs have triggered stock market declines and a broader trade war with traditional allies like Canada, Mexico, and the European Union.
Bill Adams, chief economist at Comerica Bank, warned that waning confidence could significantly impact economic growth. “People who fear the economy is heading into a downturn won’t buy new cars or houses, dine out, or go on vacations,” Adams said. “If consumer sentiment continues to deteriorate, spending will likely follow suit, and the economy could suffer a substantial blow.”
The survey also revealed that Americans anticipate a rise in unemployment in the coming year. Despite this, Trump appears to be intensifying his commitment to taxing imports. On Wednesday, he imposed 25% tariffs on all steel and aluminum imports, prompting retaliatory measures from Canada and the EU, including a 50% tax on American whiskey. Trump responded by proposing a 200% tax on European wine, spirits, and other alcoholic beverages.
“We’ve been taken advantage of for years,” Trump told reporters. “We’re not going to be taken advantage of anymore.” Additionally, Trump has placed 25% tariffs on imports from Mexico and Canada, set to fully take effect in April after various suspensions, with a lower 10% charge on Canadian oil and other energy products.
The Michigan consumer sentiment report follows a sharp decline in consumer confidence in February, as measured by the Conference Board. It also comes amid an 8% drop in the S&P 500 stock index over the past month, with companies like Target, Walmart, and Ford warning about tariff-induced uncertainty.
The rise in Americans’ inflation expectations raises concerns at the Federal Reserve, as inflation expectations can become self-fulfilling. Last week, Fed Chair Jerome Powell stated that tariffs could pose challenges for inflation control if they elevate inflation expectations. Rising expectations may reduce the likelihood of the Fed cutting its key interest rate this year, a priority for the administration as such cuts could lower mortgage rates.
“Don’t expect the Fed to intervene if plunging consumer confidence affects spending while inflation expectations soar,” Adams remarked. Commerce Secretary Howard Lutnick stated that the administration won’t assume full responsibility for the economy until the final three months of 2025, when improvements are anticipated.
— news from The Associated Press