US consumer sentiment fell sharply in April, marking a fourth month of decline. It is widely seen as a sharp response to President Donald Trump’s escalating trade war.
Preliminary readings of the University of Michigan’s closely monitored consumer sentiment index, released Friday, fell 11% to 50.8% in March. Over the past year, emotions have fallen by 34%.
The decline was “unanimous and unanimous, with age, income, education, geographical region and political affiliation,” a survey by consumer superintendent Joan Huss said in an official statement.
The share of respondents who expect unemployment rates to rise in the coming months has increased for five months, now at its highest since 2009 during the Great Recession.
Consumer sentiment is not always a reliable indicator of the economy as a whole, but it can change the mood around how the public feels about presidential leadership. Feelings among Republicans have fallen by 6% over the past month as Trump was teased, and then rolled out a series of aggressive tariffs to enact a 90-day suspension of import taxes on Wednesday.
“Interestingly, President Trump appears to be responsible for most of his emotional degradation, with 67% of respondents saying the government is “doing poor jobs” with inflation and unemployment.”
“Only 18% say they’re doing a ‘good job’. ”
Asked at a news briefing on Friday about consumer sentiment, White House spokesman Caroline Leavitt advised that the public should trust Trump when implementing his tariff plans.
“Like he said, this will be a transition period,” she said. “He wants consumers to trust him, and they should trust him.”
The outcome of previous trade war dramas is baseline tariffs for most countries of 10%, and imports from China are taxed at a total of 145%. While goods in Canada and Mexico face tariffs of up to 25%, imported automobiles, steel and aluminum are taxed at the same rate. China retaliated on Wednesday with a 125% tariff on US goods.
The Trump administration has suggested it will cut new trade agreements with more than 75 countries over 90 days.
“We’re doing really well with tariff policy,” Trump said Friday on his social media site Truth Social. “It’s so exciting for America and the world!!! It’s moving forward very quickly.”
The cusp of the recession
The erosion of America’s confidence is also emerging in financial markets. Investors are selling US debt. The U.S. Treasury 10-year interest rate was 4.51% in Friday afternoon trading, up from around 4% at the beginning of the week. This suggests economic instability in the future.
On Friday, the dollar fell to its three-year low against the euro. Larry Fink, CEO of investment firm BlackRock, told Financial News Network CNBC that the US economy is still at the pinnacle of a recession.
“Even if we’re not in a recession right now, I think we’re very close,” Fink said.
The University of Michigan Sentiment Survey found that people now expect long-term inflation to reach 4.4% from 4.1% last month. This can be of particular concern to the US Federal Reserve. The Fed is paying close attention to inflation expectations as it could potentially self-realize. If people expect prices to rise, they often take steps that can boost prices, such as accelerated purchases or seeking higher wages.
This shows that most of the week is considered a blip, indicating that consumer inflation fell to 2.4% per annum in March. Most economists believe that inflation is likely to rekindle given the fierce trade war.
Americans’ inflation expectations for the next five years are at their highest since 1991, according to forecasting company Capital Economics.
“It appears that households have reached the same conclusion as the market. Tariffs will last a lifetime of damage to the US economy,” Capital Economics assistant economist Harry Chambers said in an email to the Associated Press.
Consumer sentiment remains sharply divided by the parties, with a Democrat index of 34.1 and a Republican index of 81.9. However, both recorded sudden drops in April.
Feelings among independents plummeted from 55.7 to 46.8, falling sharply below post-election peak of 70.2. April reading among independents is lower than at any point in Joe Biden’s presidency.
These inflation expectations have been jumping on for several months. At a press conference last month, Federal Reserve Chairman Jerome Powell said the University of Michigan’s measure of inflation expectations is “outliers.” Market-based measures of inflation expectations based on inflation-adjusted Treasury securities remained low near the Fed’s 2% target.
Lower emotions usually suggest that Americans cut their spending, but in recent years, consumers have continued to spend despite the darkness. Still, the fact that employment concerns are rising can lead to more attention from consumers.