Tariffs Are Hitting The U.S. Economy Where It Hurts

• U.S. consumers are showing signs of preparing to cut back on spending as they brace to absorb price increases from President Donald Trump’s tariff campaign.
  

• Surveys show people are growing more worried about inflation and unemployment and are planning to cut back on essentials and discretionary purchases if tariffs push inflation.
  

• Consumer spending is the backbone of U.S. economic growth and slowing spending could make a recession more likely.
  

President Donald Trump’s tariffs are already shifting how people spend their money, in an ominous sign for the future of the economy.

Evidence is mounting that consumers are tightening their belts as they brace for tariffs to push up prices on all kinds of imports. In February, U.S. households cut back their spending on services while ramping up purchases of goods, which is a possible sign that people are rushing to buy things before tariffs hit, according to a report on spending and inflation from the Bureau of Economic Analysis on Friday.

In a separate survey by the University of Michigan Friday, expectations of future inflation rose to their highest since 2022, and expectations for unemployment rose to their highest since the Great Recession, flashing a warning sign that households might be preparing to cut back on shopping.

The latest data highlights the seismic impact that Trump’s continually shifting tariff policies have had on the economy in recent weeks. Economists have become more concerned that consumers, facing price increases on many products, will cut back on spending, undercutting an important pillar of the economy’s health: consumer spending is the main engine of economic growth, making up 68% of the Gross Domestic Product.

Households plan to cut back their spending significantly on both essentials and discretionary items if there is tariff-driven inflation, according to a survey this week by Morning Consult, a research firm.

Among households with income of less than $50,000, 35% plan to cut back on groceries, and 19% making more than $100,000 said the same. More than 20% of all income groups in the survey said they would cut back on dining out and clothing.

“U.S. consumers are increasingly inflation-weary, their finances are more fragile, and they face higher risks in the labor market,” Deni Koenhemsi, head of economic analysis at Morning Consult, wrote in a commentary. “These dynamics place U.S. consumer spending on a different trajectory compared to the previous shock—the pandemic—or the last time President Trump introduced tariffs.”

Behind the trend are expectations that Trump’s import taxes will push up the cost of living. Not only are merchants likely to pass on the cost of tariffs to consumers, but decreased competition from imports will allow U.S.-based companies to raise their own prices, multiple economists have predicted.