Donald Trump’s Trade War has fundamentally altered the tariff structure between the United States and China. These specific transitions pursue to mitigate exchange pressures. Recently, he made a notable move to reduce tit-for-tat tariffs, which had raised tensions between the two economic superstars to staggering heights. His decision led to a truly unprecedented run-up in the stock market. It featured a halt on sweeping, wide-ranging “reciprocal tariffs” affecting many countries. Yet for all of these efforts, consumer sentiment is still plummeting as inflation and recession fears persist.
For his part, Trump wanted to keep the economy roaring by reducing some of those tariffs. He targeted the automobile sector particularly, cutting tariffs and eliminating duties on goods imported from Mexico and Canada. Today, the tariff structure is a 10% across-the-board tariff on all imports from almost every country in the world. A hefty 30% tariff on all Chinese goods is still in effect, well above the levels set before Trump came into office. This specific tariff is especially risky, with the potential for large price increases across a wide range of products such as apparel, toys, and electronics.
Although the stock market celebrated the movement on tariffs, consumer sentiment has turned negative for the last four months. In May, consumer sentiment dealt a crushing blow. This drop was a result of uncertainty surrounding inflation and the impending possibility of a recession brought on by the initial implementation of tariffs. While inflation ticked downward last month, hitting a new low since 2021, retail sales are decelerating at record pace. The slowdown is further evidence that consumers are beginning to pull back on their spending. They’re making plans to mitigate the future impacts of the continued tariff policies.
When we entered this year, the U.S. economy was in free fall. This negative growth stands in stark contrast to the very robust expansion for late 2024. That has added pressure as current shopper sentiment is near its lowest point since a challenger inflationary boom three years back. Consumers are a little more optimistic as they move through the economic landscape that’s been carved out by existing trade policy, and what it means.
