U.S. consumer confidence big dump to a five-year low: Tariff clouds overshadow economic outlook

According to the latest data from The Conference Board, the consumer confidence index fell sharply by 7.9 points to 86.0 in April, marking the lowest level since the peak of the COVID-19 pandemic in May 2020. Jin10 and several other authoritative media outlets point out that the aggressive tariff policies of the Trump administration and the resulting inflation panic are reshaping the fundamentals of the U.S. economy, with the collapse of consumer confidence reflecting a collective anxiety about uncertainty in the future.

Consumer confidence collapses: tariff concerns become the main reason

The University of Michigan's preliminary consumer sentiment index for April was equally shocking at 50.8, close to the second-lowest level on record and only up from 50.0 in June 2022. According to the survey, from March 25 to April 8, public concern about Trump's "Liberation Day tariff" policy rose sharply, causing the confidence index to fall by 32.4% year-on-year. Stephanie Guichard, senior economist at the Conference Board's Global Indicators, said bluntly: "Consumer confidence has fallen to its lowest level since the start of the pandemic, and uncertainty over tariff policy has worsened households' expectations for future incomes and prices. Specifically, consumers' assessment of the current state of the economy (the current state index) fell by 0.9 points to 133.5, while expectations for the next six months (the expectations index) plummeted to a recent low, indicating extreme pessimism about the short-term economic outlook.

The effects of tariff policy have permeated everyday life. According to the survey, more than 60% of respondents are concerned that tariffs will push up the price of goods, especially imported consumer goods and raw materials, which will directly erode household purchasing power. At the same time, inflation expectations surged to their highest level since the early 1980s, with households widely expecting prices to rise by more than 3.6% over the next 12 months. This expectation has further dampened the willingness to spend, and some households have begun to cut back on discretionary spending to cope with the potential economic shock.

Surge in imports and GDP concerns: signals of economic slowdown emerging

The U.S. first quarter GDP data, set to be released tomorrow (May 1, 2025), is garnering significant attention, with the market widely expecting a substantial slowdown in economic growth. The Wall Street Journal cites a survey of 64 top economists indicating that the year-on-year growth rate of inflation-adjusted GDP for the fourth quarter of 2025 is expected to be only 0.8%, nearly halved from the 2% forecast at the beginning of the year, while the probability of an economic recession has surged from 22% to 45%. Analysts point out that companies, in order to avoid tariff costs, have recently accelerated the import of goods, leading to an expanded trade deficit and a short-term increase in inventory levels, but this cannot mask the essence of weak consumption.

"Behind the rush of companies to import is a panic response to the implementation of tariff policies, but this is only a short-term behavior." The Federal Reserve Bank of Boston reported that sweeping tariffs will push up U.S. inflation by 0.8 percentage points, which, combined with supply chain constraints, could further weaken the competitiveness of the manufacturing and retail sectors. The slowdown in consumer spending is particularly worrisome, with personal consumption expenditures (PCE), the backbone of the U.S. economy, expected to decline significantly, in part as high inflation and tariff expectations squeeze household budgets.

Market and Policy Game: The Fed's Dilemma

Tariff-induced inflationary pressures have put the Fed's monetary policy in a dilemma. Chicago Fed President Austan Goolsbee recently said that while the economy remains at full employment and solid growth, uncertainty over tariffs could force the Fed to slow down the pace of interest rate cuts. The market is worried that if inflation remains high due to tariffs, the Fed may be forced to maintain high interest rates or even raise interest rates, which will further dampen investment and consumption, increasing the risk of recession.

At the same time, the stock and bond markets have reacted to the tariff policy. Since the trade war escalated on April 2, the U.S. stock market has experienced a wave of sell-offs, and bond yields have risen, reflecting investors' dual concerns about economic growth and inflation. The crypto market has not been immune either, with major assets like Bitcoin experiencing a noticeable pullback in mid-April, as investor sentiment was weighed down by the global economic uncertainty triggered by tariffs.

Insights from the Crypto Circle: Hedging Demand and Long-term Opportunities

For crypto investors, the current situation is both a challenge and an opportunity. The collapse in consumer confidence and the economic slowdown may weigh on risky asset prices in the short term, but rising inflation expectations may reignite safe-haven demand for crypto assets. Bitcoin's attributes as "digital gold" may regain favor in a high-inflation environment, while decentralized finance (DeFi) platforms may attract more inflows due to the uncertainty of the traditional financial system. However, investors need to be wary of the impact of Fed tightening on liquidity, as a high interest rate environment could put pressure on riskier assets.

This article only represents the author's personal views and does not represent the position and views of this platform. This article is for information sharing only and does not constitute any investment advice to anyone.

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