Americans Grow Alarmed As Trade War Pushes Inflation Fears To 40-Year High

<p>American consumers are growing increasingly uneasy as trade tensions escalate, dragging sentiment down to the lowest point in nearly three years. According to the latest University of Michigan Surveys of Consumers, overall morale took a significant hit in April, with concerns over inflation and potential recession becoming more widespread.</p>
<p>The Consumer Sentiment Index dropped sharply to 50.8 from 57.0 in March, marking its lowest reading since June 2022. The decline cut across all demographics&mdash;age, income, education level, political leanings, and regions&mdash;highlighting a widespread unease. Notably, sentiment deteriorated more steeply among Democrats and Independents, while Republican confidence also declined, reported Reuters.</p>
<p>President Donald Trump&rsquo;s recent decision to hike tariffs on Chinese imports to 125 per cent&mdash;alongside a 10 per cent levy on nearly all other goods and a 25 per cent tax on vehicles, steel, and aluminum&mdash;has only heightened anxieties. In response, Beijing implemented its own 125 per cent tariff. The survey, which concluded on April 8, was conducted before Trump&rsquo;s latest round of tariff hikes.</p>
<p>”Consumers have spiralled from anxious to petrified,” said Samuel Tombs, chief US economist at Pantheon Macroeconomics.</p>
<h3>Inflation Concerns Complicate Fed&rsquo;s Path Forward</h3>
<p>With inflation expectations jumping to 6.7 per cent for the year ahead&mdash;the highest level since 1981&mdash;Federal Reserve officials may face mounting pressure to delay interest rate cuts. The University of Michigan report marked four consecutive months of 0.5 percentage point increases in short-term inflation expectations. Over a five-year horizon, consumers now expect inflation to average 4.4 per cent, up from 4.1 per cent in March and the highest since June 1991.</p>
<p>”This lack of labour market confidence lies in sharp contrast to the past several years, when robust spending was supported primarily by strong labour markets and incomes,” said Joanne Hsu, director of the Surveys of Consumers. The proportion of consumers bracing for higher unemployment in the year ahead reached its peak since 2009.</p>
<p><strong>Also Read : <a title=”China Fires Back With 125 Per Cent Tariff On US, Triggers Fresh Shockwaves In Global Markets” href=”https://news.abplive.com/business/trade-war-donald-trump-tariffs-china-reacts-beijing-us-relation-global-markets-inflation-1764695″ target=”_blank” rel=”noopener”>China Fires Back With 125 Per Cent Tariff On US, Triggers Fresh Shockwaves In Global Markets</a></strong></p>
<h3>Producer Prices Reflect Impact of Tariffs and Demand Slowdown</h3>
<p>Fresh figures from the Bureau of Labour Statistics revealed that the Producer Price Index (PPI) for final demand fell 0.4 per cent in March&mdash;the first decline since October 2023. The drop was largely due to a 0.9 per cent decrease in goods prices, particularly an 11.1 per cent plunge in gasoline costs. Over the past year, PPI rose by 2.7 per cent, easing from 3.2 per cent in February.</p>
<p>Steel mill product prices surged 7.1 per cent, likely reflecting tariff impacts. In contrast, wholesale food costs fell 2.1 per cent, driven by declines in eggs, beef, veal, and vegetables. Airline fares and hotel prices also dipped, echoing a broader pullback in consumer demand.</p>
<p>Core services, including healthcare and portfolio management, provided only limited inflationary pressure. The core Personal Consumption Expenditures (PCE) price index&mdash;closely monitored by the Fed&mdash;was estimated to have risen just 0.1% in March, slowing annual core inflation to 2.6 per cent.</p>
<p>”Although the core PCE estimates are a welcome relief, we don’t think we can extrapolate much from this,” said Pooja Sriram, economist at Barclays. “The tariff regime in place in March was relatively benign compared with the current circumstances, which implies that price pressures may only now start to build.”</p>