consumer sentiment index: Americans lose confidence in economy as Trump’s tariff policies fuel inflation and drive consumer sentiment to 2-year low

The University of Michigan’s consumer sentiment index nosedived to 57.9 in March, marking a 10.5% drop from February and falling short of economists’ forecasts. This reading—the lowest since November 2022—reflects growing anxiety over inflation and market volatility, exacerbated by President Trump’s aggressive tariff policies. The one-year inflation outlook surged to 4.9%, the highest in 16 months, while the five-year expectation hit 3.9%, a level unseen since 1993.Bipartisan Gloom and Tariff TurbulenceConcerns cut across party lines, with sentiment plunging 22 per cent since December. Republicans, Democrats, and independents alike reported diminished confidence, driven by uncertainty around Trump’s trade moves, including steel/aluminum tariffs and threats of 200% levies on EU liquor. Survey director Joanne Hsu noted frequent policy shifts make it hard for consumers to plan, regardless of political leanings. Meanwhile, conflicting data muddies the waters: While inflation fears spike, recent reports show modest February price hikes and flat wholesale costs.

Markets largely shrugged off the grim sentiment data, with stocks holding steady and Treasury yields rising. Investors now eye the Federal Reserve’s next move, expecting rates to hold steady this week but pricing in 0.75% cuts by year-end, likely starting in June.

FAQs:Why did consumer sentiment drop in March?
Rising inflation worries, stock market slumps, and uncertainty over Trump’s trade tariffs drove the sharp decline, affecting all political groups.

How are tariffs impacting economic outlooks?
New tariffs on metals and threatened EU liquor levies have heightened consumer anxiety, contributing to higher inflation expectations and economic planning challenges.