- The University of Michigan’s consumer-confidence index declined in April, in part because of worries over President Donald Trump’s trade policies.
- Twenty-nine per cent of respondents brought up Trump’s trade moves – and an overwhelming number of mentions were negative.
President Donald Trump’s trade battles are starting to worry the American public.
According to the new University of Michigan consumer-confidence survey, an increasing number of respondents are expressing concern over Trump’s trade policy, including tariffs announced in the past month and a half on metals and Chinese goods.
Richard Curtin, the chief economist for the survey, said in a statement that while overall consumer confidence remained high, trade was starting to weigh on the number.
“Uncertainty surrounding the evolving trade policy has caused many small (and at times inconsistent) changes in expectations,” Curtin said. “Spontaneous references to trade policies were made by 29% of all consumers in early April, with nearly all the mentions negative (27% out of 29%).”
The survey also found that consumers who brought up trade as a concern were significantly less enthusiastic about how the economy would perform over the next 12 months than those who didn’t mention trade.
“The Expectations Index was just 64.2 among those who made negative comments about trade policies, while among those who made no mention of trade policies, the Expectations Index was 93.9, a substantial difference,” Curtin said.
In the April survey, the overall Expectations Index, based on respondents’ feelings about how the economy will perform over the next year, sat at 86.8, roughly in line with its average over the past three years. But people who did not mention trade were much more confident – that group’s 93.9 reading would have been at least a five-year high for the full index. The overall measure was dragged down by people who did mention trade. If taken alone, that group’s 64.2 reading would be the index’s lowest since October 2013.
Many economists share the trade fears, since tariffs have been shown to generally push up prices and depress economic activity. A report released Thursday by the conservative-leaning Tax Foundation found that Trump’s proposed tariffs on as much as $US150 billion in Chinese goods would shave 0.1% off US gross domestic product and eventually cost 79,000 American jobs.
Tariffs function as taxes on imports in an effort to push businesses toward domestic-made products. With domestic goods generally more expensive to produce than tariff-free imports, businesses have to either eat the cost of the tariff or pass it on to consumers.
“Consumers who negatively mentioned trade policies also anticipated that the year-ahead inflation rate would be 0.4 percentage points higher than among those who did not spontaneously mention Trump’s trade policies; there was a differential of 0.2 percentage points for long term inflation expectations,” Curtin said.
Daniel Silver, an economist at JPMorgan, said the slide in the index was not surprising, especially considering the recent stock market swoon that followed Trump’s trade announcements.
“This disappointed relative to expectations, but some softening in sentiment is not too shocking given the weakening in equity markets over the past few months as well as what seems to be a string of negative headlines in the news,” Silver said.
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