Josh Balk and Christopher Lugerber
WASHINGTON (AP) — President Donald Trump’s volatile tariff threat unlocks a historic jump of public unrest as it could undermine his pledge to strengthen the increasingly weakened US economy.
The University of Michigan’s Consumer Sensation Index fell 10.5% per month in March, plunging 27.1% over the past year. A preliminary report released on Friday shows that consumer expectations for annual inflation have risen from 3.5% to 3.9%.
In addition to the ferocious stock market selling and downgrades to growth estimates by Wall Street economists, the latest confidence figures are evidence of the blowback Trump could face, suggesting that his import tax threat, intended to create factory jobs, will cause “a little pain” in the short term, just a few months after his term.
Research director Joan Hussou said in a statement that “were consistently seen across all groups by age, education, income, wealth, political affiliation and geographical region.” “Many consumers cited a high level of uncertainty about policy and other economic factors.”
Even basic Trump supporters are getting a little pessimistic. Emotions fell 3.2% among Republicans. They supported Trump in last year’s election, and after inflation surged to four-year highs under then-President Joe Biden in 2022, he supported Trump with his promise to drive growth and lower prices.
Democrats and independents recorded a sharper decline in confidence as tariffs led to stock market sales and broader trade wars with historic allies such as Canada, Mexico and the European Union.
Bill Adams, chief economist at Comerica Bank, warned that waning confidence could violate economic growth.
“People who fear that the economy is heading into the ditch will not buy a new car or house, eat or go on holiday,” Adams said. “If consumer sentiment continues to be sour, spending is likely to follow that, and the economy can be hit harder.”
The survey also found that Americans expect unemployment to surge next year.
So far, Trump appears to have doubled and tripled his commitment to taxing imports.
On Wednesday, Trump imposed a 25% tariff on all steel and aluminum imports. It led to retaliation by Canada and the EU, and announced plans to place a 50% tax on American whiskey. Trump then responded on Thursday by pledging a 200% tax on all European wines, spurts and other alcoholic beverages.
“We’ve been torn for years,” Trump told reporters Thursday. “We will not be torn apart any more.”
The US President has placed a separate 25% tariff on all imports from Mexico and Canada. This was fully effective in April after two months of various suspensions, lowering 10% bills for oil and other energy products from Canada. While these tariffs are ostensibly about stopping illegal immigration and fentanyl smuggling, Trump also wants the trade deficits to be shut down with America’s two biggest trading partners.
Trump also has a 20% tax on imports from China, which were introduced to halt fentanyl production. The president is also planning “mutual” tariffs from April 2nd in the EU, Brazil, South Korea and other countries, in addition to import taxes on cars, computer chips, medicines, copper and wood.
The Trump administration suggests that these tariffs are like economic treatment for what they inherited from Biden. Trump took office with a healthy unemployment rate of 4% and a 3% consumer price index. This has declined from its peak in June 2022, but is still rising. The Federal Reserve’s priority inflation measure was 2.5%, exceeding the 2% target.
Michigan’s consumer sentiment reading follows a sharp decline in consumer confidence in February, as measured by another study by the conference committee. It also comes as the S&P 500 Stock Index has dropped by more than 8% in the past month as companies like Target, Walmart and Ford warn of uncertainty caused by tariffs.
Hopping up Americans’ expectations of inflation will raise concerns for the Federal Reserve. Inflation expectations can be self-fulfilling as consumers and businesses often take steps to exacerbate inflation. For example, businesses can raise prices preemptively. For example, if you expect costs to rise.
Last week, Federal Reserve Chairman Jerome Powell said that if tariffs raise expectations of inflation, it could pose challenges to inflationary combat efforts. Rising expectations could make the Fed less likely to cut key interest rates this year. This is the biggest goal of management as such reductions could lower mortgage rates.
“If inflation expectations are rising and consumer confidence plummets, don’t hold your breath to get in the rescue,” Adams said.
Trump’s trade-led Secretary of Commerce Howard Lutnick said the administration would not be entirely responsible for the economy until he expected things to get better for the last three months of 2025.
“We own the economy in the fourth quarter,” Lutnick said Friday on Fox Business Network’s “Mornings with Maria.” “We’ve cut regulations. We’re getting the shovel on the basis of this $2 trillion commitment to building factories and bringing production back to America.”
However, Lutnick also suggested that tariffs on the EU and other countries are actually about respecting Trump on them.
“Donald Trump is just a reminder to the European Union he is in charge of,” he said. “They need to respect Donald Trump, and he’s going to teach them how to do that.”
Original issue: March 14th, 2025, 12:49pm EDT
