American consumers are growing increasingly worried about how President Donald Trump’s tariffs could affect inflation that has persisted into his second term.
A University of Michigan consumer survey for February showed that respondents expect the inflation rate a year from now to be 4.3%, a 1 percentage point jump from January and the highest level since November 2023, CNBC reported.
Consumer sentiment, which measures how people feel about the health of the economy, dropped to 67.8 from January's 71.3, in line with expectations from economists polled by Reuters.
Trump threatened 25% tariffs on most imports from Canada and Mexico before postponing them on Monday. He tacked an additional 10% on existing Chinese tariffs on Tuesday, prompting retaliatory tariffs from China.
Companies often pass the extra costs of tariffs on to consumers, which means American shoppers could end up paying more for everything from groceries and vehicles to gas and furniture. Trump has said the tariffs are needed to stop undocumented immigrants and fentanyl from coming to the U.S.
"WILL THERE BE SOME PAIN?" Trump posted on social media Sunday. "YES, MAYBE (AND MAYBE NOT!) BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID."
Consumers' concerns in the survey were reflected across all demographics, across age and wealth groups and political parties, the survey reported.
Joanne Hsu, the survey’s director, told CNBC this was only the fifth time in 14 years they’ve recorded such a significant jump in inflation expectations. Hsu said the collective decline in consumer sentiment, current economic conditions and consumer expectations reflected “a perception that it may be too late to avoid the negative impact of tariff policy.”
“Higher prices from tariffs are the number one financial concern for Americans, as the weight of inflation is still oppressive to family budgets, especially among those with lower incomes,” Robert Frick, corporate economist at Navy Credit Union, told CNBC. “Even slight increases in prices, especially in top pain points such as food, shelter, and transportation, would be acutely felt by millions.”
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