Under the shadow of tariffs, consumer confidence in the United States has plummeted

The latest data released by the Conference Board is like a wake-up call, ringing at the gate of the US economy. The U.S. consumer confidence index dropped sharply by 5.4 points in June to 93, a figure lower than the expectations of all the economists surveyed. Among them, the expectation indicator reflecting consumers' outlook for the next six months dropped by 4.6 points to 69, and the current situation indicator also fell by 6.4 points to 129.1. This decline in confidence almost wiped out nearly half of the rebound in the previous month. Behind this is the continuous anxiety of consumers about the possible impact of the increase in US import tariffs on the economy. ​

Looking at the specific data, the decline in the consumer confidence index in June was comprehensive. The expected indicators falling below the key psychological threshold means that consumers' pessimism about the future economic situation, personal income and employment prospects has significantly intensified. When consumers lack confidence in the future, they tend to tighten their wallets and reduce non-essential spending, which will directly impact consumption-driven industries such as retail and catering. The decline in current indicators indicates that consumers' satisfaction with the current economic environment is also decreasing. Even if their lives have not been severely impacted at present, they have begun to feel the pressure of the economic downturn. ​

The frequent adjustment of import tariff policies in the United States recently is undoubtedly a key factor leading to the decline in consumer confidence. The increase in tariffs has led to a significant rise in the cost of imported goods. To maintain their profit margins, enterprises can only pass on the costs to consumers. Take household appliances as an example. Starting from June 23rd, the United States imposed a 50% tariff on eight major categories of steel household appliances including washing machines and refrigerators, and the prices of related products rose accordingly. A manufacturer of picnic supplies was forced to raise the average price of its products by 11%-14% due to tariff costs. Even so, its sales still plummeted by 40% year-on-year. Ordinary consumers have clearly felt the pressure on living costs brought about by rising prices and have become more cautious when purchasing goods. Meanwhile, the uncertainty of tariff policies also makes consumers uneasy. They are worried that the prices of more goods will rise due to the increase in tariffs in the future, and their concerns about the economic outlook are growing day by day. ​

Furthermore, changes in the job market have also affected consumer confidence to a certain extent. Although the US job market performed relatively strongly previously, recent data show signs of loosening. Due to the rising cost of tariffs and the increasing operational pressure, some enterprises have chosen to freeze recruitment or even lay off staff. For instance, the picnic supplies manufacturer mentioned above has borne a tariff expenditure of one million US dollars, which is three times that of the same period last year, and has had to suspend its expansion plan. The reduction of job opportunities has made consumers worry about the stability of their income, further weakening their willingness to consume. ​

The impact of the decline in consumer confidence on the US economy cannot be underestimated. Consumption plays a crucial role in the US economy, accounting for approximately 70% of the gross domestic product. When consumer confidence is undermined and consumer spending decreases, it will directly lead to a decline in enterprise sales and a reduction in profits. To cope with the predicament, enterprises may further cut costs, including reducing investment and laying off staff, thus forming a vicious circle and dragging down economic growth. Meanwhile, the decline in consumer confidence may also trigger fluctuations in the financial market, and investors' expectations for the economic outlook will change accordingly. The stock market, bond market, and others will all be affected to varying degrees. ​

Faced with the predicament of declining consumer confidence, the US government and the Federal Reserve are confronted with difficult choices. The government needs to re-examine the tariff policy, weigh the relationship between trade protection and economic growth, and find a balance point that can both protect domestic industries and avoid excessive harm to the economy. The Federal Reserve needs to flexibly adjust its monetary policy in accordance with the economic situation and seek the best path between stabilizing prices and promoting economic growth. However, there are many uncertainties at the policy level at present. The Trump administration pressured the Federal Reserve to cut interest rates and planned to nominate in advance a candidate for the Fed chair who "supports rate cuts", which has intensified the uncertainty of monetary policy and also left consumers and businesses confused about the future direction of economic policies.

In the future, whether American consumer confidence can bottom out and rebound will depend on the adjustment of tariff policies, the improvement of the job market, and effective responses at the policy level. If the tariff dispute continues to escalate, the job market deteriorates further, consumer confidence may continue to decline, and the US economy will also face a greater risk of recession. Conversely, if the government can adjust policies in a timely manner and stabilize market expectations, consumer confidence is expected to gradually recover, injecting impetus into economic growth. However, in any case, the significant decline in the US consumer confidence index in June has cast a thick shadow over the future development of the US economy, which deserves high attention from all parties.