Trump's trade war is a 'darkening cloud on the horizon,' and Americans are starting to get worried
- The number of US consumers concerned about President Donald Trump's trade war increased in July, according to the University of Michigan's consumer confidence survey.
- 38% of respondents offered negative opinions about Trump's tariffs in July, up from just 15% in May.
- Consumers expressed concerns about the tariffs' effects on inflation and economic growth.
- The increased concern comes after Mexico, Canada, and the European Union retaliated to Trump's steel and aluminum tariffs and the trade war with China kicked off in earnest.
US consumers are starting to get nervous about President Donald Trump's ever-expanding trade battles, according to the latest University of Michigan consumer confidence survey.
"The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy," Richard Curtin, the survey's chief economist, said in a statement.
Overall, the confidence index remains strong at 97.1 for the month of July. That number was slightly short of the 98.2 expected by economists but roughly on par with the 97.4 average reading since the start of 2017.
But Trump's trade policies produced a growing sense of unease among respondents. Overall, 38% of survey respondents offered up negative comments about the tariff in July, climbing from 21% in June and 15% in May.
Notably, Trump's steel and aluminum tariffs went into effect on the European Union, Canada, and Mexico at the start of June, and retaliatory measures by those allies were applied in late June and early July. Additionally, Trump's tariffs on China - and Chinese retaliatory measures - hit earlier this month.
Wealthier respondents were also more likely to bring up the tariffs, according to the survey, with 52% of those in the top third of the income distribution offering negative comments.
Those worried about the tariffs had two primary concerns, Curtin said: increased consumer prices and a possible economic slowdown.
"The primary concerns expressed by consumers were a decline in the future pace of economic growth and an uptick in inflation," Curtin said. "Among those who expressed negative views of the tariffs, the Expectations Index was 30.5 points below those who made no mention of tariffs, and in addition, the expected inflation rate was six-tenths of a percentage point higher."
Economists expect that tariffs, which apply an extra duty to imports coming into the US, will force prices up for businesses. In turn, those businesses will either have to accept lower profits or pass on the price increases to consumers. The chain of events could lead to increased inflation and a slowdown in business investment.
Curtin said many Americans may not keep up with the constant volley of tariffs between Trump and other countries, but they are starting to understand that they are likely to start seeing higher prices in stores.
"While consumers may not understand the intricacies of trade theory, they have substantial experience making decisions about the timing of discretionary purchases based on prospective trends in prices," he said.