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.
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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