US consumers are becoming increasingly worried about tariffs leading to higher inflation. The latest index of consumer sentiment fell to 50.8, its second-lowest reading on record, as fears about the trade situation weigh heavily. Year-ahead inflation expectations rose to 7.3%, while long-term inflation expectations increased to 4.6%.
Tariffs were a dominant concern among consumers, with nearly three-quarters mentioning them in response to the survey. This uncertainty is driving consumer thinking about the economy. Federal Reserve Chair Jerome Powell expressed concerns that tariffs could impact long-term inflation expectations.
Even though the US and China have paused most tariffs for 90 days, the effective tariff rate remains higher than before President Trump’s inauguration. Economists believe tariffs can lead to short-term price increases, but its impact on long-term inflation is uncertain.
The latest data has not shown a significant rise in prices despite recent inflation concerns. The next consumer sentiment index will be released on May 30, providing insight into whether the tariff pause has improved sentiment.
Source: https://www.cnbc.com/2025/05/16/consumer-sentiment-may-inflation-expectations-tariffs.html