Washington CNN —
Inflation is picking up again and President Donald Trump said this week it’s all his predecessor’s fault. But no matter who Trump blames for inflation, America’s economic mood is now souring — and Trump is getting the heat for it.
The University of Michigan’s latest survey, released Friday, showed that US consumer sentiment declined in February for the second consecutive month, according to a final reading, down by a steep 10% from January. That was double the decline initially reported earlier this month.
It’s a stunning about-face after American consumers and businesses grew hopeful (briefly) about the economy’s future following Trump’s election in November. The latest decline in consumer sentiment was driven by worries over Trump’s tariffs potentially jacking up prices.
A new CNN poll released Thursday similarly showed pessimism on the rise because of prices: Nearly two thirds of US adults nationwide, 62%, said they feel Trump’s isn’t doing enough to address inflation. The Michigan survey showed that Americans are now fearful of higher inflation on the horizon.
On the campaign trail, Trump promised to “bring down prices, starting on Day One.” Clearly, that didn’t happen. In January, consumer prices climbed at the fastest monthly pace since August 2023, increasing 0.5% from December.
Joanne Hsu, the Michigan survey’s director, said in a release that the broad decline was “in large part due to fears that tariff-induced price increases are imminent.”
But changes in sentiment are beginning to diverge based on political affiliation.
“While sentiment fell for both Democrats and Independents, it was unchanged for Republicans, reflecting continued disagreements on the consequences of new economic policies,” she said.
Inflation jitters, the future and the Fed
The Trump administration’s aggressive approach to tariffs is a key reason why attitudes about the economy are souring, according to various consumer surveys and polls.
So far, the administration has implemented 10% across-the-board tariffs on all Chinese goods and announced 25% tariffs on all steel and aluminum imports, with no exceptions. It is also studying how best to apply “reciprocal tariffs” on America’s trading partners, which could come in early April. Trump is also keeping 25% tariffs on Mexico and Canada on the table, as soon as next month, a move that economists say would likely stoke inflation.
“The economy faces heightened uncertainty,” Atlanta Fed President Raphael Bostic said in an essay published Thursday. “A trade policy uncertainty index by a group of Federal Reserve economists has surged past its historic peak.”
All the drama around tariffs has affected Americans’ perception of prices: Expectations for inflation in the year ahead surged this month to 4.3%, according to the Michigan survey, up a full percentage point from January to the highest level since November 2023. On a call with reporters Thursday, Bostic said “we’re going to pay attention to all” measures of inflation expectations.
The Federal Reserve, tasked with managing interest rates, keeps a close eye on consumer perceptions of prices because they can sometimes be self fulfilling, so if consumers expect inflation to pick up, they could modify their spending.
But the Fed doesn’t have a nightmare on its hands just yet. Central bankers specifically focus on longer-run inflation expectations, which didn’t rise this month as much as the short-run expectations figure did, up to 3.5% in February from 3.2% in January. But it was higher than the figure initially reported.
“These days, higher tariffs and immigration policies are often discussed and thought likely to increase prices, cool aggregate demand and possibly soften employment. From the standpoint of monetary policy, it could be appropriate to ignore or look through an increase in the price level if the impact on inflation is expected to be brief and limited,” St. Louis Fed President Alberto Musalem said Thursday at an event in New York. “However, a different monetary policy response could be appropriate if higher inflation is sustained, or long term inflation expectations rise.”
Blaming Biden
The closely watched Consumer Price Index rose 3% in January from a year earlier, the Labor Department said last week, the fastest annual pace since the summer of 2024.
In an interview with Fox News’ Sean Hannity that aired Tuesday, Trump said “inflation is back,” blaming the latest uptick on government spending during the Biden administration. To be fair, Trump doesn’t shoulder much of the blame, since he occupied the Oval Office for less than half of the days covered by the latest inflation report.
The latest episode of high inflation undoubtedly occurred on former President Joe Biden’s watch.
“I had nothing to do with it,” Trump said. “These people have — have run the country. They spent money like nobody has ever spent.”
But inflation is now Trump’s problem.
And some economists have pointed to the role that the government’s spending played in heating up the economy after the pandemic — trillions of dollars for Covid relief and infrastructure projects — but it wasn’t the sole reason why inflation surged. In reality, it was a combination of factors, such as pandemic shocks to supply and demand and the Russia-Ukraine war.
“Pent-up demand, stimulative policies, pandemic changes in work and leisure practices, and the additional savings associated with constrained services spending all contributed to a historic surge in consumer spending on goods. The pandemic also wreaked havoc on supply conditions,” Fed Chair Jerome Powell said last year in his keynote address at the Kansas City Fed’s annual economics symposium.
“Enter inflation,” he said.
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