The preliminary data released on Friday from the Michigan University for March indicates that due to tariffs, consumer confidence in the USA has reached a new low not seen in over two years, and long-term inflation expectations have seen the largest increase since 1993. Additionally, consumers' expectations regarding their own financial situation have fallen to an all-time low.

The preliminary value of the Michigan University Consumer Confidence Index in the USA for March was 57.9, significantly below the expected 63, and lower than the expectations of all economists in the media survey, with a previous value of 64.7 in February. In terms of sub-indices, the current index preliminary value was 63.5, falling to a six-month low, with expectations at 64.4, and a previous value of 65.7 in February; the expectations index preliminary value was 54.2, the lowest since July 2022, against an expectation of 63, with a previous value of 64.

Regarding inflation expectations that the market is closely monitoring, the preliminary value of one-year inflation expectations from the Michigan University in March was 4.9%, the highest level since 2022, with an expectation of 4.3%, and a previous value of 4.3% in February. The preliminary value of five-year inflation expectations for March was 3.9%, the highest level in over thirty years, with an expectation of 3.4%, and a previous value of 3.5%.

Recent surveys indicate that inflation expectations among American consumers have broken through the range of fluctuations seen in recent years. For a considerable time, the Michigan five-year inflation expectations generally fluctuated in a narrow range of 2.9% to 3.1%. In June 2022, when US inflation was at this cycle's peak, this inflation expectation preliminary value once reached 3.3%, the highest since 2008. The latest long-term inflation expectations for February and March 2025 have exceeded levels from the two years prior to the pandemic.

Tariffs and their potential impact on consumer prices may have significant implications for the Federal Reserve's interest rate policy. Federal Reserve officials have indicated that they will not rush to further cut interest rates. The skyrocketing inflation expectations in the USA are indicative of a loosening of long-term inflation expectations; the Michigan inflation expectation data from June 2022 prompted aggressive interest rate hikes by the Federal Reserve, and subsequently, inflation expectations fell, greatly alleviating concerns about potential loss of control.

In this Michigan survey, 48% of respondents mentioned concerns regarding tariffs, expressing worries over uncertainty pertaining to policy and economic factors.

Analysis indicates that as the Range of President Trump's tariff policies continues to expand, Consumers are increasingly concerned that additional tariffs will ultimately lead to higher costs. Although the CPI inflation in February has receded, if price pressures continue to rise, households may cut back on non-essential spending.

The survey also showed that Consumer expectations regarding their personal financial situation have dropped to a historic low.

Joanne Hsu, director of the consumer survey at the University of Michigan, stated:

Many Consumers mentioned the high uncertainty brought by policies and Other economic factors; the frequently changing economic policies make it difficult for Consumers to plan for the future, regardless of their policy preferences. In the survey, 48% of respondents spontaneously brought up tariff issues during the interview. The key point is that these Consumers generally expect tariffs to significantly exert upward pressure on inflation in the future.

The goal of the Trump administration is to correct trade imbalances, stimulate investment in the USA, and promote domestic production of key Commodities and materials. However, Consumers believe that there is a great deal of uncertainty in the economy, government policies, and financial markets.

The decline in Consumer confidence is widespread across various groups. The confidence index for Republicans has dropped nearly 3 points, the index for Democrats has fallen nearly 10 points, and the index for Independents has decreased by 5.4 points.

Consumer confidence affects economic growth in the coming months. Pessimistic consumer sentiment can suppress spending levels, thereby impacting economic recovery, while optimistic consumer sentiment contributes to future economic growth.

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