In Washington, volatility in President Donald Trump’s tariff strategy is stirring significant public concern, posing potential risks to his goals of bolstering a U.S. economy that shows signs of vulnerability.
The University of Michigan’s consumer sentiment index experienced a sharp decline of 10.5% from the previous month in March, with a year-on-year drop of 27.1%. This preliminary survey, released on Friday, also revealed that consumers’ annual inflation expectations rose from 3.5% to 3.9%, marking the largest monthly increase since 1993.
Coupled with a dramatic downturn in the stock market and revised lower growth projections from Wall Street analysts, these numbers suggest potential backlash for Trump, who early in his administration indicated his threats of import tariffs might result in temporary “pain” to create manufacturing jobs.
Joanne Hsu, director of the University of Michigan’s survey, stated that sentiment declines were widespread across all demographic categories. “Many consumers referenced the considerable uncertainty surrounding policy and other economic influences,” Hsu explained.
Supporters of Trump, even among his core base, are exhibiting increased skepticism, with sentiment dropping by 3.2% among Republicans. Trump’s campaign had promised increased economic growth and reduced prices following an inflation surge to a 40-year high in 2022 under Joe Biden. That spike had diminished consumer confidence for Biden and contributed to Trump’s return.
For Democrats and independents, the confidence decline is even more pronounced, compounded by tariff-induced market selloffs and escalating trade tensions with long-standing allies like Canada, Mexico, and the European Union.
Bill Adams, chief economist at Comerica Bank, cautioned that declining consumer confidence could severely impact economic growth. “If people fear economic downturns, they may avoid big purchases like cars or homes, and limit spending on dining and vacations,” Adams noted.
The survey further indicated that Americans expect unemployment to rise in the upcoming year.
Despite these warnings, Trump has intensified his efforts to impose import taxes. On Wednesday, he placed a 25% tariff on all steel and aluminum imports, prompting Canada and the EU to retaliate, announcing a 50% tariff on American whiskey. Trump countered on Thursday with a promise to impose a 200% tariff on European wines, spirits, and other alcohol products.
Trump remarked to reporters that “We’ve been exploited for years, and we’re not going to let it continue.”
He also announced separate 25% tariffs on imports from Mexico and Canada, which will be fully effective in April, after phased suspensions, with a 10% charge on energy imports from Canada. According to Trump, these measures aim to curb illegal immigration and fentanyl smuggling, as well as to balance the trade deficit with these major partners.
Additionally, Trump implemented a 20% tariff on imports from China to halt fentanyl production and announced reciprocal tariffs to effect on April 2 on multiple countries, including the EU, Brazil, and South Korea, targeting imports like automobiles, computer chips, pharmaceuticals, copper, and lumber.
The Trump administration describes these tariffs as necessary remedies for the economic conditions inherited from Biden. At the start of Trump’s term, unemployment stood at a favorable 4%, while the consumer price index was at 3%, having fallen from a June 2022 high, yet still above optimal levels. The Federal Reserve’s preferred inflation metric was 2.5%, surpassing the 2% target.
This Michigan sentiment reading follows a notable decline in consumer confidence in February, measured by the Conference Board, and coincides with an over 8% fall in the S&P 500 stock index over the past month, as major corporations including Target, Walmart, and Ford expressed concerns over tariff-related uncertainties.
Americans’ increased inflation expectations will likely raise alarms at the Federal Reserve. Inflation expectations can be self-perpetuating; if consumers and businesses foresee rising inflation, they may take preemptive actions like raising prices.
Federal Reserve Chair Jerome Powell expressed concern last week that tariffs could complicate efforts to manage inflation if they elevate expectations. Heightened expectations may hinder potential interest rate cuts this year, a key administration objective as such reductions could lower mortgage rates.
Comerica Bank’s Adams warned against expecting Federal Reserve intervention if falling consumer confidence coincides with rising inflation expectations, which could dampen spending further.
Commerce Secretary Howard Lutnick, Trump’s primary trade advisor, stated the administration will fully assume responsibility for the economy by late 2025, with expectations of improvement by then.
Lutnick, during an interview, asserted that the administration’s efforts to cut regulation and promote a $2 trillion initiative to build domestic factories will pay off.
However, he suggested that tariffs aimed at the EU and other nations are partly about securing recognition for Trump’s leadership. “Donald Trump is affirming U.S. authority to the European Union,” Lutnick said, emphasizing the need for respect toward Trump.