Consumer Confidence Surges Amid Easing Trade War Fears

Americans Feel More Optimistic as Tariff Tensions Cool

A notable shift in consumer sentiment is underway, driven by a perceived easing of global trade tensions and a softening of inflation anxieties. New data reveals a significant rebound in optimism, offering a potential boost to economic activity.

Sentiment Rebounds Sharply

The University of Michigan’s latest Surveys of Consumers indicate a substantial increase in confidence. The headline index climbed to 60.5, exceeding expectations of 54 and marking a 15.9% jump from the previous month. Both current conditions and future expectations saw considerable gains, rising 8.1% and 21.9% respectively.

This improvement appears linked to a change in tone surrounding **President Trump**’s tariffs. Following an initial period of heightened threats in April, a 90-day negotiation period with China seems to be yielding some progress.

“Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed,”

—Joanne Hsu, Survey Director

Despite the positive trend, consumers still acknowledge potential economic risks. All sentiment indexes remain below year-ago levels, reflecting ongoing concerns about the impact of tariffs and broader geopolitical uncertainties. According to the U.S. Census Bureau, retail sales experienced a modest 0.2% increase in May, suggesting cautious spending habits persist. Source: U.S. Census Bureau, June 2025

Inflation Expectations Cool

The survey also revealed a significant decline in inflation expectations. The one-year outlook dropped to 5.1%, a 1.5 percentage point decrease, while the five-year view edged down to 4.1%. This suggests consumers are less worried about tariffs immediately driving up prices.

“Consumers’ fears about the potential impact of tariffs on future inflation have softened somewhat in June,”

—Joanne Hsu, Survey Director

However, expectations remain above levels seen in the latter half of 2024, indicating a belief that trade policy could still contribute to inflation in the coming year. The Federal Reserve Bank of New York reported a one-year inflation view of 3.2% in May, a 0.4 percentage point decrease.

Recent economic data shows limited upward price pressure. Both producer and consumer prices rose by only 0.1% monthly, but economists anticipate the tariffs will have a more noticeable impact in the months ahead. This has prompted **President Trump** and other administration officials to urge the Federal Reserve to lower interest rates. The central bank is scheduled to meet next week, with most analysts predicting no rate cuts before September.