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US Consumer Sentiment Declines Amid Trade Policy Uncertainty

US Consumer Sentiment Declines Amid Trade Policy Uncertainty
David Paul Morris / Bloomberg / Getty Images
  • PublishedMarch 15, 2025

Consumer confidence in the United States has declined sharply as concerns over trade policies and economic uncertainty grow.

The latest survey from the University of Michigan, released Friday, shows that consumer sentiment fell by 11% in March to a reading of 57.9, down from 64.7 in February. This marks the lowest level since November 2022 and a significant shift from the optimism seen in December following the US presidential election.

The decline in sentiment coincides with President Donald Trump’s implementation of tariffs on key trading partners, including Mexico, Canada, and the European Union. These tariffs, particularly those on steel and aluminum, have led to retaliatory measures from other nations, increasing uncertainty in financial markets. The back-and-forth nature of these trade policies has made it difficult for businesses and consumers alike to plan for the future.

“Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences,” said Joanne Hsu, the survey’s director.

Concerns over inflation are also mounting. Expectations for inflation over the next year rose to 4.9%, up from 4.3% in February, marking three consecutive months of increases. Higher tariffs could further contribute to rising prices, affecting household purchasing power.

Signs of a slowing economy are becoming more evident. Consumer spending declined in January for the first time in nearly two years, and companies such as Target, Walmart, and Delta Air Lines have indicated that consumers may cut back further in the coming months. Meanwhile, the Federal Reserve Bank of Atlanta’s GDP forecast suggests a potential economic contraction of 2.4% in the current quarter.

Despite these concerns, the labor market remains a stabilizing force, with unemployment still at historically low levels.

“The consumer has been the workhorse of this economic cycle, and that will remain the case even as we move through this slower consumption patch,” said Jeff Schulze, head of economic and market strategy at ClearBridge Investments.

As the Federal Reserve prepares for its upcoming policy meeting, it faces a challenging economic landscape. While inflation expectations are rising, signs of slower growth suggest a delicate balancing act for policymakers. Fed officials have indicated a wait-and-see approach, aiming to assess the overall impact of tariffs and other economic policies before making any adjustments to interest rates.

“You essentially have opposing forces in the economy,” said Tom Bruce, macro investment strategist at Tanglewood Total Wealth Management. “With tariffs, you have the threat of higher prices; and with sentiment declining, you start getting concerns about growth because businesses won’t be investing the way they otherwise would have.”

For now, financial markets remain watchful, with traders factoring in potential interest rate cuts later in the year. However, much will depend on how trade policies evolve and whether economic conditions stabilize in the months ahead.

CNN, USA Today, and CNBC contributed to this report.