Consumer expectations crater to three-decade low amid Trump tariff chaos – Politico
2025-04-25T17:08:55Z
The danger for Trump is if consumers’ declining faith in the economy causes them to slow their spending in the coming months.
“Consumers perceived risks to multiple aspects of the economy, in large part due to ongoing uncertainty around trade policy and the potential for a resurgence of inflation looming ahead,” Joanne Hsu, who leads the university’s survey team, said in a statement Friday. “Even more concerning for the path of the economy, consumers anticipated weaker income growth for themselves in the year ahead.”
The danger for Trump is if consumers’ declining faith in the economy causes them to slow their spending in the coming months. The drop in expectations worsened regardless of the age, education, income and political affiliation of those surveyed, Hsu said. What’s more, consumers now expect prices to climb by 6.5 percent over the next year. It’s the largest projected spike in prices recorded by the University of Michigan since 1981, when the U.S. faced the dual threat of a recession and double-digit inflation.
The Federal Reserve’s target rate for annual inflation is 2 percent.
The White House did not immediately respond to a request for comment.
Earlier this week, Trump’s top economic adviser, Stephen Miran, said the economic angst that has fueled recent market volatility will be put to rest when the president follows through with new trade agreements and tax cuts.
“You’ve got to look forward through what’s happening now with tariffs, to the trade deals that are being negotiated, to the tax relief that is being negotiated with Congress,” Miran, who chairs the White House Council of Economic Advisers, said at an event hosted by Semafor. “All of these, on the other side of the volatility that’s happening right now, are going to create a strong economy.”
Surging inflation and persistent economic pessimism severely weakened former President Joe Biden’s political standing during the final years of his administration. If the decrease in consumer sentiment is prolonged, and the trade war ushers in higher prices and softer economic growth, Trump could face a similar fate.
“This month’s consumer sentiment report is more evidence that an otherwise healthy economy is being held hostage by tariff policy and the associated uncertainty,” Daniel Hornung, who was deputy director of Biden’s National Economic Council, said in a statement. “At this point, the only clear path to avoiding a recession is for the Administration to walk back as much of their tariff policy as possible, and to do so as quickly as possible.”
Top economists polled by Bloomberg now believe there is a 45 percent chance the U.S. will enter a recession in the next year — an outcome that many considered highly unlikely upon Trump’s return to the White House. His administration’s rapid-fire rollout of tariffs — followed by head-spinning pauses and escalations with trading partners — has frozen hiring and investment plans for businesses, which is likely to drag down growth.
For now, the negative vibes have yet to translate into the so-called hard data that’s more reflective of the economy’s health. The unemployment rate was just 4.2 percent last month — which is low by historical standards — and inflation unexpectedly cooled in March despite fears of tariff-related spikes.
Nevertheless, “the U.S. economy is pointed in a bad direction,” Bill Adams, the chief economist for Comerica Bank, said Friday. “The further it goes, the higher the risk of a recession.”
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