Whipsawed by Trump's tariffs, the US public is getting a lot more
nervous about the economy
[March 15, 2025] By
JOSH BOAK and CHRISTOPHER RUGABER
WASHINGTON (AP) — President Donald Trump's volatile tariff threats are
unleashing historic jumps in public anxiety, with the potential to
undermine his pledges to strengthen a U.S. economy that is increasingly
weakened.
The University of Michigan's index of consumer sentiment tumbled 10.5%
on a monthly basis in March and plunged 27.1% over the past year. The
preliminary report released Friday shows that consumers’ expectations of
annual inflation climbed to 3.9% from 3.5%, the largest monthly jump
since 1993.
Along with a ferocious stock market selloff and downgrades to growth
estimates by Wall Street economists, the latest confidence numbers are
evidence of possible blowback facing Trump, who just months into his
term has suggested that his threats of import taxes meant to create
factory jobs would in the short term cause “a little pain."
Declines were “seen consistently across all groups by age, education,
income, wealth, political affiliations, and geographic regions,” Joanne
Hsu, director of the survey, said in a statement. "Many consumers cited
the high level of uncertainty around policy and other economic factors."

Even Trump's base supporters are turning slightly more pessimistic.
Sentiment fell 3.2% among Republicans. They backed Trump in last year's
election on the promise that he would boost growth and bring down prices
after inflation spiked to a four-decade high in 2022 under
then-President Joe Biden, an event that caused consumer confidence to
slump for the Democrat and helped pave the way for Trump's return.
Democrats and independents posted even sharper declines in confidence,
as the tariffs have triggered stock market selloffs and a wider trade
war with historic allies such as Canada, Mexico and the European Union.
Bill Adams, chief economist at Comerica Bank, warned that the waning
confidence could crush economic growth.
“People who are afraid the economy is headed into a ditch won’t buy new
cars or houses, go out to eat, or go on vacations,” Adams said. “If
consumer sentiment continues to sour, spending will likely follow it
lower and the economy could take a substantial hit.”
The survey also found that Americans expect unemployment to spike in the
coming year.
So far, Trump appears to be doubling and tripling down on his commitment
to taxing imports.
On Wednesday, Trump imposed 25% tariffs on all steel and aluminum
imports. That led to retaliations by Canada and by the EU, which
announced plans to put a 50% tax on American whiskey. Trump then
responded on Thursday by promising a 200% tax on all European wine,
spirts and other alcoholic beverages.
“We've been ripped off for years,” Trump told reporters on Thursday.
“We're not going to be ripped off anymore.”
The U.S. president has separately placed 25% tariffs on all imports from
Mexico and Canada that will go into full effect in April after two
months of various suspensions, with a lower 10% charge on oil and other
energy products from Canada. Those tariffs are ostensibly about stopping
illegal immigration and the smuggling of fentanyl, though Trump has also
indicated that he wants the trade deficit closed with America's two
largest trading partners.
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President Donald Trump speaks to reporters during a meeting with
NATO Secretary General Mark Rutte at the White House in Washington,
Thursday, March 13, 2025. (Pool via AP)
 Trump also has a 20% tax on imports
from China that was put in place to stop fentanyl production. The
president also plans “reciprocal” tariffs starting April 2 on the
EU, Brazil, South Korea and other countries, in addition to import
taxes on autos, computer chips, pharmaceutical drugs, copper and
lumber.
The Trump administration is suggesting that these tariffs are
something of an economic cure-all to what it inherited from Biden.
Trump came into office with a healthy unemployment rate of 4% and
the consumer price index at 3%, which was down from its June 2022
peak but still elevated. The Federal Reserve's preferred inflation
measure was 2.5%, above its 2% target.
The Michigan consumer sentiment reading follows a sharp drop in
consumer confidence in February, as measured in a separate survey by
the Conference Board. It also comes as the S&P 500 stock index has
fallen more than 8% over the past month, as companies such as
Target, Walmart and Ford have warned about the uncertainty caused by
tariffs.
The jump in Americans' inflation expectations will raise concerns at
the Federal Reserve. Inflation expectations can become
self-fulfilling, because when consumers and businesses expect higher
inflation, they often take steps that make inflation worse.
Businesses can raise prices preemptively, for example, if they
anticipate their costs will rise.
Last week, Fed Chair Jerome Powell said tariffs could pose problems
for inflation-fighting efforts if they caused inflation expectations
to rise. Rising expectations could make it less likely the Fed will
cut its key interest rate this year, a top goal for the
administration because such cuts could reduce mortgage rates.
"Don’t hold your breath for the Fed to ride to the rescue if
plunging consumer confidence hits spending at the same time that
inflation expectations are soaring," Adams said.

Commerce Secretary Howard Lutnick, Trump's lead on trade, said the
administration won't be fully responsible for the economy until the
final three months of 2025, when he expects things will be better.
“We own the economy in the fourth quarter,” Lutnick said Friday on
Fox Business Network's “Mornings with Maria.” “We cut regulation. We
get shovels in the ground of this $2 trillion of a commitment to
build factories, to bring production back to America.”
But Lutnick also suggested that the tariffs against the EU and other
nations are really about getting them to respect Trump.
“Donald Trump is just reminding the European Union who is in
charge,” he said. “They need to respect Donald Trump, and he is
going to teach them how to do that.”
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