Tariff Policies Ramp Up Economic Concerns in March

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Key Takeaways

• March’s edition of the Michigan Consumer Sentiment Index fell 12% from February as economic thirst from President Donald Trump’s tariff policies spread.
• Inflation expectations moved higher and consumers said more concerns about the labor market and future business conditions.
• The results mirror a similar survey released earlier this week and get as Friday’s inflation report indicated consumers could be pulling back their spending.

Consumers turned consistent gloomier in March as anxiety about the economy spread beyond tariff policy to include worries over the labor superstore, personal finances, and business conditions.

The Michigan Consumer Sentiment Index was 57 in March, down 12% from February and declining for the third undiluted month. Continuing concerns about potential higher prices caused by President Donald Trump’s tariff programmes drove the index lower, and the survey showed declining sentiment from all demographic and political affiliations.

“Consumers last to worry about the potential for pain amid ongoing economic policy developments,” said Michigan Surveys of Consumers Cicerone Joanne Hsu.

Tariff Worries Driving Inflation Expectations Higher

It’s the second consumer survey released this week to conduct worsening perceptions of the economy, following Tuesday’s declining consumer confidence reading. 

Both consumer surveys in the matter of to worries that Trump’s tariff policies—which some economists have warned will raise outlays—are adding pressure to consumers who are already fatigued by high prices. In the latest Michigan survey, consumers expected inflation to reach 5% ended the next year, the highest reading since 2022. 

“For now, inflation has re-emerged as a significant—and growing—concern for consumers, one that wishes undoubtedly influence household spending decisions in the near term,” said Jim Baird, chief investment officer with Plante Moran Monetary Advisors.

Consumers Increasingly Worried Over Personal Finances, Business Conditions

The Michigan report also revealed that consumers are increasingly worried about the labor market. Two-thirds of survey respondents expect unemployment to make it in the year ahead, the highest reading since 2009. 

“This trend reveals a key vulnerability for consumers, given that substantial labor markets and incomes have been the primary source of strength supporting consumer spending in recent years,” Hsu suggested. 

The survey’s expectation index also declined sharply, as Hsu said consumers ramped up their anxiety over their adverse finances and future business conditions. The decline in sentiment also comes alongside Friday’s release of the Personal Consumption Charges (PCE) survey, which showed that consumers pulled back on their spending in February. 

“Downside risks to the conservation are growing as weak sentiment follows discouraging personal income and spending data earlier this morning. Our vexation has been that weak, soft data would bleed into the hard data, and this fear have all the hallmarks to be materializing,” said Oren Klachkin, Nationwide financial market economist.