Consumer Sentiment Continues Freefall, Inflation Expectations Rise as a Result of Trump’s Chaotic Trade War

The cost of living continues to rise under President Trump, and Americans are rightfully concerned. Today, the University of Michigan Surveys of Consumers released its Consumer Sentiment Index for May showing sentiment has plummeted nearly 30% since President Trump took office in January to its second-lowest level on record as a result of Trump’s trade policy. Inflation expectations rose to 7.3% – the highest since 1981.

Despite Trump backing down on his trade war with China earlier this week, the cost of essentials continues to increase for working families, with major retailers like Walmart announcing price hikes in response to tariff chaos and small businesses facing massive tariff bills and shipping costs. Members of Congress held a press conference this week to draw attention to the ‘baby tax’ the Trump Administration is placing on parents by pushing up the cost of strollers, car seats, and toys.

Instead of working to address rising costs, House Republicans are slashing basic needs programs to pay for Trump’s billionaire tax giveaway. The GOP bill cuts Medicaid, nutrition assistance, and energy programs at a time when working families are struggling to cover their grocery bills, health care costs, and utility bills. As the bill moved through the Energy & Commerce Committee this week, Republicans voted to allow big businesses to rip off working families by restricting state laws that crack down on predatory landlords, retailers hiking prices based on personalized data, and apps that drive down wages for workers.

Groundwork Collaborative’s Chief of Policy & Advocacy Alex Jacquez released the following statement:

“It’s clear that President Trump never had a plan or strategy to win the trade wars he started. While he blinked on China, it’s too late for working families who are feeling the pain of higher prices and for small businesses that are impacted by higher shipping prices and supply chain snarls.
“Instead of offering relief to families who are struggling to pay for groceries, rent, and other essentials, Republicans are slashing critical programs that make life more affordable to give another tax break to billionaires. This isn’t leadership. It’s economic sabotage. And Americans know it.”

This week in the Trump Slump, new polling and economic indicators continue to show that President Trump’s policies are tanking the economy.

Economic indicators:

• The University of Michigan Surveys of Consumers released its Consumer Sentiment Index showing sentiment declined for the fourth consecutive month to 50.8 for May, the second-lowest level on record. Inflation expectations also rose to 7.3%, the highest since 1981.
• This week, the April Consumer Price Index showed inflation at 2.3% year-over-year, with prices rising by 0.2% in April.
• The Small Business Optimism Index fell for the second consecutive month below the 51-year average from 98 to 95.8, and 34% of business owners reported job openings they could not fill.
• The Census Monthly New Residential Construction report for April showed slowing housing permits and starts compared to a year ago, particularly for single-family construction, indicating that housing continues to be a pain point for the economy.

Polling:

• New polling from Groundwork Collaborative and Data For Progress found that over two-thirds of voters blame President Trump for current issues in the economy, nearly two-thirds blame Trump for the current levels of inflation, and a vast majority (81%) are worried about rising grocery costs.
• KPMG’s American Perspectives survey reported that Americans are looking to save as the economy becomes more uncertain—43% of respondents said they’ll delay buying a car due to tariffs, and 70% said they are using or plan to use free ad-supported TV to save on streaming services.
• The inaugural Strength in Numbers/Verasight poll showed that Americans “broadly disapprove of the job Donald Trump is doing as president,” and a majority disagree with cutting programs—including Medicaid—to extend tax breaks.
• A report from the Ludwig Institute for Shared Economic Prosperity (LISEP) found that a “minimum quality of life” is out of reach for the bottom 60% of U.S. households.

Expert Commentary:

• As Trump’s trade war continues to raise prices for consumers, Walmart’s Chief Executive Doug McMillon confirmed the retailer will hike prices, “Even at the reduced levels, the higher tariffs will result in higher prices.”
• Joe Brusuelas, Chief Economist at RSM, said of Tuesday’s CPI report: “Those are tell-tale signs of consumer stress. This is the never-ending daily chaos exacting a cost on the economy.”
• Chris Meekins, an analyst at Raymond James, said Trump’s executive order on prescription drugs is “not a material event in our view” and “reminds us of how in President Trump’s first term he was all bark, no bite on drug pricing.”
• Groundwork Collaborative Executive Director Lindsay Owens called out House Republicans for voting to restrict state laws that crack down on surveillance pricing, automated insurance denials, automated management systems, and other uses of artificial intelligence that allow corporations to gouge consumers and exploit workers: “Not only are House Republicans giving their billionaire donors and large corporations a massive tax handout, they are giving RealPage and bad actors like them a free pass to rip off working families… The GOP tax bill tells you everything you need to know about the Republican party’s priorities and how unserious they are about lowering costs for working families.”
• Chief of Policy Programs at The Century Foundation Angela Hanks blasted President Trump for the baby tax he’s placed on parents: “Trump’s partial rollback of tariffs has not undone the harm to American families. From car seats and sippy cups to strollers and cribs, parents still face higher prices today than they did before his initial tariff announcement… Instead of taking action to lower costs for families with young children, President Trump and Republicans in Congress are dead set on passing a tax bill that benefits their wealthy friends while actually raising costs for working families.”