US economic forecasts have been defying gloomy expectations, with inflation at a four-year low and consumer sentiment showing signs of improvement. The stock market has also recovered from its recent lows. However, the positive news is being overshadowed by intensifying China trade tensions.
President Trump has signaled that the US-China trade truce might be in danger, citing alleged Chinese violations of the agreement. This could lead to tariffs increasing instead of decreasing, which would negatively impact the economy.
Economists predict that price pressures won’t be visible in data until summer months. Retailers have already stockpiled inventory before tariffs took effect, reducing their reliance on consumer spending.
Despite this, consumer sentiment surveys show consumers feeling cautiously optimistic about the economy. The University of Michigan’s consumer sentiment index remained steady in May, while the Conference Board’s index surged. Consumers are closely tied to trade data, which is why they’re watching the situation closely.
Recent economic data shows a shift in consumer behavior, with people pulling back on spending and choosing to save instead. Unemployment filings have also increased since November 2021, indicating that jobs may become harder to find.
The bottom line is that uncertainty is not a welcome state for consumers or economists alike. The US-China trade tensions threaten the economic recovery gains made so far, making it hard to be happy about the current situation.
Source: https://www.axios.com/2025/06/01/trump-tariffs-economy