Americans feel uneasy about their wallets as they fear prices will rise due to President Donald Trump’s aggressive tariffs. February saw the consumer sentiment drop to a seven-month low.
The University of Michigan’s consumer survey shows that consumers feel inflation will rise 4.3% in the year ahead, up 1 percentage point from January—the highest since November 2023.
Additionally, finding jobs is taking longer, and revised data showed employment growth slowed in January.
What’s behind the concern?
The worry stems from aggressive tariffs pushed by President Donald Trump against Canada and Mexico, major US trading partners.
His threat of a 25% blanket tariff on imports from the two countries raised fears of higher prices as companies usually pass on additional costs to consumers. Even though the deadline was delayed, a 10% tariff on China was imposed, and the EU could be next. China has already retaliated with its own tariffs.
Goldman Sachs predicts a 5% tariff hike could cut S&P 500 earnings by 2%. Meanwhile, gold prices are already rising as traders rush to stockpile.
Market and economic reactions
Stocks fell, with the Dow Jones dropping nearly 300 points. Economists warn that rising prices in essential areas like food, housing and transportation could further strain household budgets.