U.S. Consumer Sentiment Reaches Second-Lowest Level on Record Amid Tariffs, Recession Fears

What Happened?

Newly released data revealed U.S. consumer sentiment declined sharply in April as 12-month inflation expectations surged to its highest since 1981.

The University of Michigan Surveys of Consumers said Friday that its Consumer Sentiment Index plunged 11% to 50.8 this month from a final reading of 57.0 in March.

It marks the second-lowest reading on records going back to 1952.

Surveys of Consumers Director, Joanne Hsu, highlighted that consumers reported multiple warning signs that raise the risk of recession.

These signs are related to business conditions, personal finances, incomes, inflation, and labor markets, which have all continued to deteriorate this month.

The number of consumers anticipating a rise in unemployment has also reportedly increased for the fifth consecutive month, and its highest since 2009.

Why it Matters

According to data, the lack of labor market confidence correlates with President Donald Trump's escalating trade war impacting nations globally.

Although Trump suspended universal tariffs for 90 days, he maintained a 10% blanket duty on almost all U.S. imports.

Automotives, steel, and aluminum levies of 25% were also kept in place.

China hiked its levies to 125% on U.S. imports Friday, effectively shutting out the world's biggest economy in a major escalation of trade war.

The ongoing battle between the U.S. and China threatens to rip apart trade ties between the world’s two largest economies.

China has called out to other nations to form a united front after the U.S. imposed a 145% tax levy on Chinese goods.

'Sentiment has now lost more than 30% since December 2024 amid growing worries about trade war developments that have oscillated over the course of the year,' said Hsu.

Wall Street and the Federal Reserve are reportedly watching how souring sentiment translates into consumer spending.

Survey data fielded between March 25 and April 8 is delayed amid recently announced tariff activity.

How it Affects You

Experts like BlackRock's Larry Fink told CNN Friday that the current dense fog of uncertainty is reminiscent of the 2008 global financial crisis.

The shock from tariffs could potentially drive growth in the U.S. down by two percentage points this year.

The back-and-forth tariff hikes in Trump's pursuit to rectify trade practices have increased the likelihood of a 2025 recession.

JPMorgan said it now put the odds of a global economic recession this year at 60%, up from 40% previously.

U.S. stock markets have reportedly seen their worst week since 2020.

It's all concern that everyday consumers and small business owners worry could be a repeat of challenges faced during the Covid pandemic.