Consumers Seek Relief as Trump’s Tariff ‘Liberation Day’ Approaches

Recent surveys indicate that voters are becoming increasingly apprehensive regarding the administration’s trade policies, which Wall Street investors and analysts perceive may push the resilient yet flawed economy inherited by Trump into a recession.

The three main U.S. stock indexes declined on Friday following new economic indicators. The markets have been volatile for weeks due to the accumulation of policy decisions and conflicting statements from White House officials about the potential impact on consumers stemming from these changes.

After the market gained $3 trillion in the weeks following Trump’s election victory, the S&P 500 index has plunged since its peak on February 19, erasing those gains and experiencing a loss of over 3.5% since Election Day. This downturn has caused anxiety among 401(k) holders and led some financial advisers to act as counselors for nervous clients.

Consumer spending, which drives about two-thirds of the U.S. economy, has experienced a slowdown but has not collapsed entirely in the early months of this year. Retail sales saw a modest increase of 0.2% in February, even as households focus on essential purchases over discretionary spending. New vehicle sales were up 1% in the first quarter, as reported by Edmunds, though industry experts are now concerned about a potential decline due to rising prices by automakers and dealers attempting to counteract tariff costs.

Meanwhile, many brands are increasingly depending on affluent consumers to sustain sales, with executives across various industries anticipating slower growth ahead.

This scenario may compel the Federal Reserve to postpone decisions on reducing interest rates. Policymakers assessing the latest data are likely to conclude that discussions about rate cuts should be deferred until the latter half of the year, according to Joe Brusuelas, chief economist at RSM.

For consumers, this implies that credit card rates above 20% are likely to persist. Although rates for popular 30-year fixed mortgages have eased to a still-high 6.71%, uncertainty regarding policies threatens to undo recent improvements in an already unaffordable housing market. Moreover, while yields on 10-year Treasury bonds have calmed recently, analysts interpret this as reflecting increasing anxiety about the economy’s trajectory.

“With all these changes, a thick fog has settled in,” remarked Federal Reserve Bank of Richmond President Tom Barkin in recent comments. “This is not just a typical ‘forecasting is hard’ fog; it’s more of a ‘zero visibility, pull over and turn on your hazards’ type of fog.”

Corporate concerns

Anxieties around tariffs are reverberating through corporate boardrooms as executives prepare to release a new wave of earnings reports around mid-April.

Almost 900 nonfinancial companies mentioned tariffs in their latest earnings calls, according to S&P Global Market Intelligence. Many firms, however, have yet to incorporate these impacts into their forecasts, a sign of the significant uncertainty about the timing, duration, rates, exceptions, and possible retaliatory actions regarding tariffs, analysts noted.

The economy grew by 2.4% at the close of 2024, slightly surpassing expectations, government economists shared on Thursday. This growth was largely driven by robust consumer spending, compensating for a decline in investment. Nonetheless, a slowdown in productivity is anticipated.

The Federal Reserve Bank of Atlanta anticipates a contraction in the first quarter, suggesting many businesses may increase orders prior to the implementation of tariffs and then become more cautious with their spending. JPMorgan and KPMG predict GDP growth of only 1% in the first quarter, while Goldman Sachs has lowered its forecast from 1% to 0.6% following recent economic data.

JPMorgan has not dismissed the possibility of rates approaching “0%.”

Promises made

The present circumstances contrast sharply with the economic revival that Trump claimed would start on his first day in office.

He promised during his campaign to begin lowering prices “immediately,” yet the consumer price index has stubbornly fluctuated between 2.4% and 3.7% since June 2023. The Fed’s preferred inflation measure was reported on Friday as exceeding expectations at 2.8% for February.

Other economic goals seem distant as well.

Trump had vowed to halve energy costs within a year; however, oil-and-gas producers are now concerned that instability could decrease prices, prompting them to reduce production to safeguard their profit margins. Despite investing millions into Trump’s re-election campaign, some drillers criticized him in an anonymous survey released Wednesday, with one executive calling his “drill, baby, drill” slogan “nothing short of a myth and populist rallying cry,” indicating that his “administration’s chaos is a disaster for the commodity markets.”

While gas prices are nearly 40 cents lower than last year, they have begun to rise seasonally.

Trump also pledged to “take” jobs and factories from other countries to create “thousands and thousands of businesses and trillions of dollars in wealth,” yet manufacturing output declined last month while job levels in that sector and others remained stagnant.

The administration is just over two months into its four-year term, and substantial policy shifts can take time to influence the economy. Many Republican priorities, including extensive tax cuts and reductions to safety-net programs, are still under debate in Washington. Additionally, several swift deregulation and government downsizing initiatives by the president have faced delays or have been blocked by courts, attracting criticism from Trump and his supporters who are frustrated by judicial limits on their actions.

“Americans are continuing to experience the ongoing repercussions of four years of economic turmoil under Joe Biden,” stated a White House representative on Friday. “The Trump administration is focused on eliminating Biden’s excessive spending, which is the root of the inflation problem, and the drop in energy prices demonstrates how President Trump’s America First agenda is already providing essential relief for ordinary Americans.”

While announcing his auto tariffs on Wednesday, the president expressed optimism for future growth, predicting that tariff revenue will reach between $600 billion and $1 trillion “a year from now” and stated, “We’re going to have a market the likes of which nobody’s ever seen before.”

“You’re going to witness things that will be truly remarkable,” Trump claimed. “And I believe you’re already seeing them.”