Americans’ confidence in the economy sank to one of its weakest levels on record in April, despite President Trump’s 90-day pause on planned tariff hikes, as fears of a recession and surging inflation continued to weigh on households nationwide. The University of Michigan’s Consumer Sentiment Index fell to 52.2—an 8% drop from March and the fourth-lowest reading since 1952—as broad demographic groups cited persistent trade policy uncertainty and expectations of higher living costs as their primary concerns.
Background
On April 9, President Trump signed an executive order delaying 120% tariffs on imports from China, the European Union, and other trading partners for 90 days, following the expiration of the “de minimis” exemption for packages valued under $800, according to Wikipedia. That exemption had allowed many small-value shipments—especially from low-cost e-tailers—to avoid duties, softening price pressures for American consumers. Its suspension was intended to give businesses time to adapt, but it did little to quell widespread unease.
April Survey Results
Index Components
- Overall Sentiment: The index declined to 52.2 in April from 57.0 in March, representing an 8.4% month-over-month decrease and a 32.4% year-over-year decline.
- Current Conditions: The gauge of present economic conditions fell to 59.8 from 63.8, reflecting worries over job security and income.
- Expectations: The expectations subindex declined to 47.3 from 52.6—a 10.1% monthly drop and the steepest three-month decline since the 1990–91 recession.
“Consumers perceived risks to multiple aspects of the economy, in large part due to ongoing uncertainty around trade policy and the potential for a resurgence of inflation looming ahead,” said Joanne Hsu, director of the University of Michigan survey.
Inflation Outlook
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Short-term: One-year inflation expectations rose to 6.7%, the highest since 1981, as households anticipated faster price increases on goods and services().
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Long-term: Five-year inflation forecasts climbed to 4.4%, signaling doubts about the Federal Reserve’s ability to contain price pressures.
Economic Implications
Spending Risk
Consumer expenditures account for roughly 70% of the US GDP. Economists warn that sustained declines in sentiment often presage pullbacks in discretionary spending—on items such as dining out, travel, and durable goods—which could slow growth or even trigger a recession..
Unequal Burden
Research by UCLA and Yale economists reveals that lower-income households rely disproportionately on low-value shipments: 48% of packages to the poorest ZIP codes qualify for the de minimis exemption, compared to 22% for the wealthiest areas. Its removal will therefore hit vulnerable families the hardest, according to Wikipedia.
What’s Next
Federal Reserve Decision
Fed policymakers will consider these dismal sentiment readings alongside stubbornly high inflation in determining whether to tighten monetary policy further at their June meeting.
Retail and Auto Sales Data
May’s retail sales and durable-goods orders will provide early indicators of whether consumers are cutting back in response to tariff-driven price increases and economic uncertainty.
Trade-Policy Outlook
Markets will watch for any extension of the tariff pause, new exemptions,, or progress at the World Trade Organization ministerial in July, which could help restore confidence if policymakers signal a path toward more predictable trade rules,.
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