Whipsawed by Trump's tariffs, the US public is getting a lot more nervous about the economy

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Whipsawed by Trump's tariffs, the US public is getting a lot more nervous about the economy

2025-03-15 00:24 Last Updated At：10:58

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.”

Stocks quake after Trump threatens to escalate tariffs despite seeing how much Wall Street hates it

2025-04-08 03:25 Last Updated At：03:30

NEW YORK (AP) — U.S. stocks are careening through a manic Monday after President Donald Trump threatened to crank his tariffs higher, despite a stunning display from Wall Street showing how dearly it wants him to do the opposite.

The S&P 500 was down 0.8% in late trading, but only after a shocking day of heart-racing reversals as battered financial markets try to figure out what Trump’s ultimate goal is for his trade war. If it’s to get other countries to agree to trade deals, he could lower his tariffs and avoid a possible recession. But if it’s to remake the economy and stick with tariffs for the long haul, stock prices may need to fall further.

The Dow Jones Industrial Average was down 563 points, or 1.5%, with a little less than an hour remaining in trading, while the Nasdaq composite was 0.6% lower.

All three indexes started the day sharply lower, and the Dow plunged as many as 1,700 points following even worse losses worldwide on worries that Trump's tariffs could torpedo the global economy. But it suddenly surged to a gain of nearly 900 points. The S&P 500, meanwhile, went from a loss of 4.7% to a leap of 3.4%, which would have been its biggest jump in years.

The sudden rise followed a false rumor that Trump was considering a 90-day pause on his tariffs, one that a White House account on X quickly labeled as “fake news.” Stocks then turned back down. That a rumor could move trillions of dollars' worth of investments shows how much investors are hoping to see signs that Trump may let up on tariffs.

But soon after that, Trump threatened to raise tariffs further against China after the world's second-largest economy retaliated last week with its own set of tariffs on U.S. products.

It’s a slap in the face to Wall Street, not just because of the sharp losses it’s taking, but because it suggests Trump may not be moved by its pain. Many professional investors had long thought that a president who used to crow about records reached under his watch would pull back on policies if they sent the Dow reeling.

On Sunday Trump told reporters aboard Air Force One that he does not want markets to fall. But he also said he wasn’t concerned about a sell-off, saying “sometimes you have to take medicine to fix something.”

Trump has given several reasons for his stiff tariffs, including to bring manufacturing jobs back to the United States, which is a process that could take years. Trump on Sunday said he wanted to bring down the numbers for how much more the United States imports from other countries versus how much it sends to them.

Still, indexes kept swerving between losses and gains Monday, even after Trump threatened to raise his tariffs, because hope still remains in markets that negotiations may still come.

“Could things get worse? Of course they could," said Nate Thooft, a senior portfolio manager at Manulife Investment Management. “We’re not calling the all-clear at all, but when you have this type of volatility in the market, of course you're going to have back and forth” in markets not just day to day but also hour to hour.

“We’re all waiting for the next bit of information,” he said. “Literally a Truth Social tweet or an announcement of some sort about real negotiations could dramatically move this market. This is the world we live in right now.”

All that seems to be certain is that the financial pain hammered investments around the world on Monday, the third straight day of steep losses after Trump announced tariffs in his “Liberation Day.”

Stocks in Hong Kong plunged 13.2% for their worst day since 1997. A barrel of benchmark U.S. crude oil dipped below $60 during the morning for the first time since 2021, hurt by worries that a global economy weakened by trade barriers will burn less fuel. Bitcoin sank below $79,000, down from its record above $100,000 set in January, after holding steadier than other markets last week.

Nike dropped 4% for one of the larger losses on Wall Street. Not only does it sell a lot of shoes and apparel in China, it also makes much of it there. Last fiscal year, factories in China made 18% of its Nike brand footwear. Vietnam made 50%, and Indonesia made 27%.

Trump’s tariffs are an attack on the globalization that’s remade the world’s economy, which helped bring down prices for products on the shelves of U.S. stores but also caused production jobs to leave for other countries.

It also adds pressure on the Federal Reserve. Investors have become nearly conditioned to expect the central bank to swoop in as a hero by slashing interest rates during downturns.

But the Fed may have less freedom to act this time around because the conditions are so much different. That's cheifly because inflation is higher at the moment than the Fed would like. And while lower interest rates can goose the economy, they can also put upward pressure on inflation. Expectations for inflation are already swinging higher because of Trump’s tariffs, which would likely raise prices for anything imported.

“The recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession,” JPMorgan CEO Jamie Dimon, one of the most influential executives on Wall Street, wrote in his annual letter to shareholders Monday. “Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth.”

In the bond market, Treasury yields rallied Monday to recover some of their sharp drops from earlier weeks. Some of the big move may have been because of reduced expectations for cuts to interest rates by the Fed. Some analysts also said it could be due to investors outside of the United States wanting to pare their U.S. investments.

The yield on the 10-year Treasury jumped to 4.14% from 4.01% late Friday.

Earlier in the day, the S&P 500 briefly fell more than 20% below its record set less than two months ago. If it finishes a day below that bar, it would be a big enough drop that Wall Street has a name for it. A “bear market” signifies a downturn that’s moved beyond a run-of-the-mill 10% drop, which happens every year or so, and has graduated into something more vicious.

The S&P 500, which sits at the heart of many investors’ 401(k) accounts, is coming off its worst week since COVID began crashing the global economy in March 2020.

Kurtenbach reported from Bangkok. McHugh reported from Frankfurt, Germany. Associated Press writers Ayaka McGill, Paul Harloff, Matt Ott and Jiang Junzhe also contributed.