Recent polling shows voters growing uneasy with the administration’s trade agenda, which Wall Street investors and analysts see as increasingly likely to throw the flawed but sturdy economy Trump inherited into a recession.
The three major U.S. stock indexes fell Friday following the new economic data. Markets have juddered for weeks on the pileup of policy moves and statements by White House officials — some of them contradicting one another over how much, if any, pain consumers should expect from the administration’s changes.
Consumers have expressed their concern. But the risk is that this goes beyond attitudes and infects behavior.
Mark Hamrick, Bankrate senior economic analyst
After gaining $3 trillion in the weeks after Trump won the election, the broad-based S&P 500 index has crashed back to earth. It has not only erased those gains since peaking on Feb. 19 but has lost more than 3.5% since Election Day, sending tremors through 401(k) holders’ retirement accounts and forcing some financial advisers to play therapist to spooked clients.
Consumer spending, which powers about two-thirds of the U.S. economy, has slowed but hardly collapsed in the opening months of this year. Retail sales rose a modest 0.2% in February even as households prioritize necessities over nonessential purchases. New vehicle sales rose 1% in the first quarter, according to Edmunds, though industry analysts now fear a reversal as automakers and dealers hike prices to offset tariff costs.
Many brands, meanwhile, are relying more on wealthy customers to prop up sales, and executives across industries foresee slower growth in the year ahead.
That could lead the Federal Reserve to hold off on lowering borrowing costs. Policymakers weighing the latest data are likely to decide that “any conversation around [interest] rate cuts needs to be pushed back to the second half of the year,” Joe Brusuelas, chief economist at the accounting firm RSM, wrote Friday.
For consumers, that means credit card rates north of 20% are set to stick around. While rates for popular 30-year fixed mortgages have eased to a still-steep 6.71%, policy uncertainty threatens recent improvements in a housing market that remains widely unaffordable. And while yields on 10-year Treasury bonds have cooled lately, analysts see that more as a reflection of growing concern about the economy’s direction.
“With all this change, a dense fog has fallen,” Federal Reserve Bank of Richmond President Tom Barkin said in public remarks Thursday. “It’s not an everyday, ‘forecasting is hard’ type of fog. It’s a ‘zero visibility, pull over and turn on your hazards’ type of fog.”
Corporate disquiet
Tariff anxieties are also ricocheting through boardrooms as executives draw up a fresh batch of earnings reports to start releasing around mid-April.
Nearly 900 nonfinancial companies mentioned tariffs on recent earnings calls, S&P Global Market Intelligence said last week. But many firms have yet to factor those impacts into their forecasts, a holding pattern that “reflects the enormous level of uncertainty around when tariffs might be enacted, for how long, at what rate, what exceptions might apply, and what retaliatory measures might mean,” the analysts wrote.
Gross domestic product expanded by 2.4% at the end of 2024, slightly more than anticipated, government economists said Thursday, with relatively strong consumer spending offsetting a drop in investment. But productivity is increasingly expected to slow.
The Federal Reserve Bank of Atlanta now forecasts a contraction in the first quarter, saying many businesses are likely to ramp up orders before tariffs take hold and then tighten their purse strings. JPMorgan and KPMG foresee GDP expanding by just 1% in the first quarter, and Goldman Sachs downgraded its outlook from 1% previously to 0.6% after Friday’s data.
JPMorgan hasn’t ruled out a rate “closer to 0%.”
Campaign promises
The current situation stands in contrast to the economic renaissance Trump campaigned on launching from his first day in office.
He vowed on the stump to begin lowering prices “immediately,” but the consumer price index has been rattling stubbornly between 2.4% and 3.7% since June 2023. On Friday, the Fed’s preferred inflation gauge came in hotter than expected, at 2.8% as of February.
Other economic milestones look far off, too.
We’re going to have a market the likes of which nobody’s ever seen before.
President Donald Trump
Trump promised to halve energy costs within a year, but oil-and-gas producers now worry that instability could drive down prices and lead them to throttle production to protect their margins. While the industry funneled tens of millions of dollars into Trump’s re-election, drillers slammed him in an anonymous survey released Wednesday. One unnamed executive called Trump’s “drill, baby, drill” mantra “nothing short of a myth and populist rallying cry” and said his “administration’s chaos is a disaster for the commodity markets.”
Gas prices, while nearly 40 cents cheaper than a year ago, have begun their seasonal rise.
Trump also pledged to “take” other countries’ jobs and factories and create “thousands and thousands of businesses and trillions of dollars in wealth,” yet manufacturing output contracted last month while employment levels in that and other sectors remain flat.
The administration is little more than two months into a four-year run, and even an explosive policy shift can take time to ripple through the economy. Many Republican priorities, including sweeping cuts to taxes and safety-net programs, remain under discussion in Washington. And several of the president’s rapid deregulation and government-downsizing efforts have been stalled or blocked by courts, drawing attacks by Trump and his allies frustrated with judicial checks on their actions.
“Americans are continuing to feel the lingering effects of four years of economic disaster under Joe Biden,” a White House spokesperson said in a statement Friday. “The Trump administration is focused on slashing Biden’s runaway spending that fueled inflation in the first place, and declining energy prices prove how President Trump’s America First agenda is already delivering much-needed relief for everyday Americans.”
In announcing his auto tariffs Wednesday, the president vowed more growth was around the corner. He forecast $600 billion to $1 trillion in tariff revenue “a year from now” and said, “We’re going to have a market the likes of which nobody’s ever seen before.”
“You’re going to see things that are going to be actually amazing,” Trump said. “And I think you already have.”
