US Tariff Fears Drive Consumer Sentiment Near Record Low

U.S. consumer sentiment fell sharply in May 2025, hitting 50.8 on the University of Michigan's index, its second-lowest level ever, as the decline persisted for a fifth consecutive month. The drop is mainly attributed to anxiety over new U.S. tariffs, particularly those targeting Chinese imports, fueling expectations of higher inflation with year-ahead forecasts reaching 7.3%, the highest since 1981. Nearly three-quarters of consumers cited tariffs as a major concern, reflecting broad unease over trade policy. Despite a late survey-period announcement of a 90-day pause and reduction in U.S.-China tariffs, there was little immediate improvement in sentiment. The pessimism spans party lines and impacts both short- and long-term economic outlooks, raising concerns among investors and policymakers about potential growth headwinds and the future of interest rate cuts. Retailers such as Walmart have warned of imminent price hikes, further stoking cost of living worries.