U.S. Consumer Confidence Sinks to Two-Year Low as Tariff Worries Mount

The University of Michigan's latest consumer sentiment survey, released Friday, showed confidence dropped sharply in early April.

The University of Michigan’s latest consumer sentiment survey, released Friday, showed confidence dropped sharply in early April.

The index fell to 50.8, the weakest reading since June 2022. That’s a steep fall from March’s 57 and far below economists’ forecast of 53.8.

Rising concerns over President Trump’s sweeping tariffs appear to be a major driver. Inflation expectations for the year ahead jumped to 6.7% — the highest since 1981. Just a month ago, that number was 4.9%. Back in January, it was 3.3%.

Long-term inflation worries climbed too. Consumers now expect 4.4% inflation over the next five to 10 years, up from 4.1% in March.

The survey, conducted between March 25 and April 8, captured early reactions to Trump’s April 2 “reciprocal tariff” announcement. It did not, however, reflect responses to his 90-day pause on select levies or this week’s hike in China tariffs.

“Consumers report multiple warning signs,” said Joanne Hsu, director of the University of Michigan’s survey. “Business conditions, incomes, inflation expectations, and labor market outlooks all worsened this month.”

Since December, sentiment has dropped over 30% — a signal that households now view trade policies as a lasting economic threat.

“Households appear to have come to the same conclusion as markets: the tariffs will do lasting damage to the U.S. economy,” said Harry Chambers, assistant economist at Capital Economics.

Despite growing fear, inflation metrics remain relatively benign. The Bureau of Labor Statistics said core Producer Price Index (PPI) rose 3.4% in April, a slight slowdown from March’s 3.5% gain.

Core Consumer Price Index (CPI) also slowed, increasing 2.8% year-over-year — the smallest rise in four months. Economists had expected a reading of 2.9%, anticipating a slight uptick from March’s 2.7%.

Meanwhile, markets have been battered by Trump’s trade policies. Even after Wednesday’s historic rebound, the S&P 500 is still down more than 7% since the president’s April 2 announcement of sweeping tariffs.