A lady strolls down the aisle of a Walmart supermarket in Houston, Texas, on May 15, 2025. U.S. buyers are getting more and more concerned that tariffs are gonna cause higher inflation, based on a University of Michigan survey that came out on Friday. The consumer sentiment index fell to 50.8, going down from 52.2 in April, in the initial reading for May. That’s the second-lowest number on record, behind June 2022. The outlook for price changes also took a wrong turn. Expectations for inflation in the next year went up to 7.3% from 6.5% last month, while long-term inflation expectations increased to 4.6% from 4.4%.
Most of the survey was done before the U.S. and China announced a 90-day break on most tariffs between the two nations. The trade situation seems to be a major factor affecting consumer sentiment. “Tariffs were randomly brought up by nearly three-quarters of consumers, up from almost 60% in April; uncertainty about trade policy still dominates consumers’ thoughts about the economy,” Joanne Hsu, director of the Surveys of Consumers, said in the announcement. Inflation expectations are closely followed by investors and policymakers. Federal Reserve Chair Jerome Powell has stated that the central bank wants to ensure that long-term inflation expectations don’t increase because of tariffs before they start cutting rates again.
Even with the pauses on import taxes against China and other countries, the effective tariff rate for goods entering the United States is still much higher today than it was before President Donald Trump’s inauguration in January. Economists on both sides mostly agree that tariffs might cause a short-term price hike, although the extent of that increase and whether it would lead to long-term inflation are still unclear. Recent inflation data hasn’t shown a tariff bump, as both the consumer price index and producer price index for April came in below consensus estimates. A final consumer sentiment index for the month is set to come out on May 30, and it will probably be closely watched to see if the tariff break led to an improvement in sentiment.
The lady casually shopping at Walmart in Houston, Texas, might not really care about tariffs and inflation expectations, but hey, it’s good to stay informed, right? Who knows, maybe it’s just me, but I feel like understanding how these things impact the economy is kind of important. So, whether or not you’re into economics, keeping an eye on these numbers might not hurt. After all, it’s always good to know what’s going on with the money stuff. So, let’s see how things play out and if the tariffs really do end up affecting prices in the long run.
