US consumer sentiment is deteriorating: Trump's tariff policy is driving up inflation expectations

US consumer sentiment is deteriorating: Trump's tariff policy is driving up inflation expectations Reuters • 2 hours • 2 minutes reading time Washington (Reuters) - Consumer sentiment in the US has deteriorated surprisingly significantly at the start of President Donald Trump's term in office. The barometer for consumer sentiment fell by seven points to 98.3 points in February, the sharpest drop since August 2021, the Conference Board Institute said on Tuesday about its survey. Economists surveyed by the Reuters news agency had only expected a decline to 102.5 points. For the first time since June 2024, the index based on consumer expectations was below the threshold of 80, which normally signals an impending recession. Another alarm signal is that consumer inflation expectations for the next twelve months have increased noticeably: US citizens are now expecting an inflation rate of 6.0 percent, compared to 5.2 percent in January. In addition to the recent price increase for important staple foods such as eggs, this also shows the effects of tariffs expected by consumers, said economist Stephanie Guichard from the Conference Board. The US Federal Reserve is aiming for an inflation rate of two percent. In January it was significantly higher at 3.0 percent. The punitive tariffs threatened or already imposed by President Donald Trump pose a new inflation risk because they are likely to make imports from the affected countries more expensive. This potential danger is also of concern to the central bank, as can be seen from the minutes of the most recent interest rate meeting. According to a study, the memorandum on mutual trade and tariffs signed by Trump also increases the likelihood of a global trade war.