Americans are growing increasingly worried about inflation in the near term as President Donald Trump’s new tariffs stir concerns about rising prices, according to the latest University of Michigan consumer survey released Friday.
Inflation Expectations Jump
Survey respondents now expect inflation to hit 4.3% within the next year—a full 1 percentage point jump from January and the highest level since November 2023. This marks only the fifth time in 14 years that year-ahead inflation expectations have increased by at least one percentage point in a single month.
“Many consumers appear worried that high inflation will return within the next year,” said Joanne Hsu, the survey’s director.
The longer-term five-year inflation outlook saw a smaller uptick, rising to 3.3%, up 0.1 percentage point from January.
Tariff Concerns Weigh on Sentiment
Although Trump postponed tariffs on Canada and Mexico, concerns over price increases shook consumer confidence. The uncertainty was further compounded by China’s decision to impose retaliatory tariffs in response to U.S. trade measures.
“Higher prices from tariffs are the number one financial concern for Americans, as the weight of inflation is still oppressive to family budgets,” said Robert Frick, corporate economist at Navy Credit Union. “Even slight increases in prices, especially in top pain points such as food, shelter, and transportation, would be acutely felt by millions.”
Stock Market Reacts
Wall Street responded negatively to the survey data, with the Dow Jones Industrial Average initially dropping nearly 300 points after the report was released.
Consumer Sentiment Takes a Hit
Broader economic optimism also declined:
- Headline Consumer Sentiment Index: 67.8 (-4.6% from January, -11.8% from a year ago)
- Current Conditions Index: 68.7 (-7.2% from January, -13.5% from a year ago)
- Expectations Index: 67.3 (-2.9% from January, -10.5% from a year ago)
Economists surveyed by Dow Jones had expected a stronger reading of 71.3, signaling that the tariff uncertainty is weighing heavily on consumer sentiment.
Conclusion
Trump’s tariff policies have sparked a sharp rise in inflation fears and weakened consumer confidence. While long-term expectations remain stable, the immediate outlook for inflation and economic growth appears more uncertain. Investors and policymakers will be closely monitoring how these trade measures impact household spending and the broader economy in the coming months.
