Americans continue to grow uneasy about the economy as President Donald Trump wages an erratic trade war that could send US inflation rising and even trigger a recession.
Consumer confidence sank 7.9 points in April to a reading of 86, the Conference Board said in its latest survey released Tuesday. That’s the lowest level since May 2020 and a larger decline than economists had projected. The survey’s Expectations Index, which captures people’s outlook on the economy, plummeted 12.5 points this month to 54.4, the lowest level in 13 years.
Meanwhile, the share of Americans anticipating a recession in the year ahead climbed to a two-year high, the survey showed. Trump’s tariffs were “on top of consumers’ minds,” according to their write-in responses.
“Consumers explicitly mentioned concerns about tariffs increasing prices and having negative impacts on the economy,” the Conference Board said in a release.
As the Trump administration reaches its 100th day in power, various surveys and polls continue to show growing pessimism among US consumers. Their spending is the source of America’s economic might, powering about 70% of its output.
Since taking office in January, Trump has pushed a chaotic tariff regime, slashed the federal workforce, clamped down on immigration and attacked the Federal Reserve. Not only have Trump’s actions unsettled consumers, but they’ve also sent a chill down Wall Street’s spine.
Will people spend like they’re in a recession?
Pessimism hasn’t led to weaker spending in recent years, but it’s unclear whether that will remain the case this time around.
In June 2022, when consumer sentiment dropped to a record low as inflation reached a four-decade high, Americans continued to open their wallets in the following months.
Similarly in 2023, when a standoff in Congress over the debt ceiling unnerved consumers, people still dished out for concerts and travel that year.
A study by Fed economists published Thursday showed as much, arguing that people have overestimated the effect of inflation on their finances in recent years, which in turn affected their perceptions of the economy. Researchers linked people’s responses in surveys with their verified purchases from 2019 to 2024.
Still, some Fed officials remain worried about America’s souring economic mood and the possibility that consumers could actually pull back this time.
“I think there’s lots of reasons to be worried about consumer spending,” Richmond Fed President Thomas Barkin said last week at an event in Richmond, Virginia. “Consumer sentiment has dropped, for example, pretty significantly over the last couple months and consumers seem to be more worried about inflation and worried about losing their job.”
Fed officials are also concerned about people’s perception of prices worsening in recent months, which could make the central bank’s job of fighting inflation more difficult, if Trump’s trade war indeed stokes inflation. That’s because inflation expectations can be self-fulfilling, so if people expect prices to ratchet higher, they adjust their spending accordingly.
Inflation expectations in the year ahead rose in April to 7%, according to the Conference Board survey, the highest level since November 2022. A similar survey from the University of Michigan has similarly shown a run-up in year-ahead inflation expectations.
Looking ahead
Trump’s trade war is far from settled and his administration has signaled it’s not going to let up on its aggressive immigration crackdown, but there are other major policy changes on the horizon.
The Republican-led Congress, back from its two-week recess, is expected to pass legislation in the coming months to extend Trump’s 2017 tax cuts, which economists say will likely boost the economy — eventually.
“You’ll have a tariff-induced slowdown in the second half of 2025, but then fiscal policy will launch up the economy in 2026,” said Nicole Cervi, an economist at Wells Fargo. “We look for personal tax rates to decline across the board, and our operating assumption is that you get an additional disposable income of $150 billion for the household sector in 2026.”
Treasury Secretary Scott Bessent told reporters on Monday that “we’ve got three legs to the president’s economic agenda: trade, tax and deregulation, and we hope that we can have this tax portion done by Fourth of July.”
Trump has taken tax relief a step further, claiming on Sunday that he will eliminate income taxes and replace that with revenue from tariffs, though such a development would face many hurdles.
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