A woman walks down the aisle of a Walmart supermarket in Houston, Texas on May 15, 2025.
Ronaldo Schemidt | AFP | Getty Images
U.S. consumers are increasingly worried about tariffs leading to higher inflation, according to a University of Michigan survey released Friday.
In pre-reading in May, the consumer sentiment indicator fell to 50.8, down from 52.2 in April. This is the second lowest reading on a record for June 2022.
The prospect of price changes has also moved in the wrong direction. Yearly inflation expectations rose from 6.5% last month to 7.3%, while long-term inflation expectations reached 4.4% to 4.6%.
However, the majority of the investigation was completed before the US and China announced a 90-day suspension on most tariffs between the two countries. Trade situations appear to be an important factor in examining consumer sentiment.
“Taxes were voluntarily mentioned by nearly three-quarters of consumers in April, from almost 40% to nearly three-quarters of consumers. Uncertainty about trade policy continues to dominate consumers’ views on the economy,” said the director of consumer research.
Inflation expectations are closely monitored by investors and policymakers. Federal Reserve Chairman Jerome Powell said the central bank wants to ensure that long-term inflation expectations do not rise due to tariffs before interest rate cuts.
Even with a suspension on import taxation on China and other countries, the effective tariff rates for goods entering the US are still significantly higher than before President Donald Trump took office in January. Economists on both sides of the aisle largely agree that tariffs could lead to short-term increases in prices, but the extent of the increase and whether it will promote long-term inflation remains unclear.
Recent inflation data shows no tariff conflicts as both the April consumer and producer price index fell below consensus estimates.
The month’s final consumer sentiment index is scheduled to be released on May 30th, and could be closely monitored to see if the tariff suspension led to improved emotions.
