U.S. consumer sentiment plunged to a nearly 2-1/2-year low in March and inflation expectations soared amid worries that President Donald Trump’s sweeping tariffs, which have ignited a trade war, would boost prices and undercut the economy.

The deterioration in sentiment and inflation expectations reported by the University of Michigan Surveys of Consumers on Friday was across political party affiliation, with consumers saying “frequent gyrations in economic policies make it very difficult for consumers to plan for the future.”

That mirrors similar concerns in some business surveys. The uncertainty created by Trump’s on- and off-again tariffs as well as an escalation in trade tensions risks derailing the economic expansion. Fears of higher prices, which drove consumers’ long-term inflation expectations to levels last seen in early 1993, create a challenge for Federal Reserve officials as they consider the next steps for monetary policy.

“The jury is back and the verdict is in. Trump 2.0 policies are harming the economy and the future prosperity of America,” said Christopher Rupkey, chief economist at FWDBONDS. “The consumer is frightened and sees sharply higher prices ahead despite the assurances from Washington that trade tariffs are good for the economy.”

The University of Michigan said its Consumer Sentiment Index dropped to 57.9, the lowest level since November 2022, from a final reading of 64.7 in February. Economists polled by Reuters had forecast the index falling to 63.1.

The index has erased all the gains posted in the aftermath of Trump’s election victory in November.

The weakness in sentiment this month reflected a deterioration in expectations for the future across multiple facets of the economy, including personal finances, employment, inflation, business conditions and the stock market.

Republicans recorded a 10% drop in their expectations index, while Independents saw a 12% decrease. Expectations among Democrats tumbled 24%.

“Consumers from all three political affiliations are in agreement that the outlook has weakened since February,” said Surveys of Consumers Director Joanne Hsu.

Trump has slapped a raft of tariffs on a wide range of goods from key trade partners like Canada, China and the European Union, which have responded with duties of their own. Some tariffs have been imposed and then suspended for a month.

Trump on Thursday threatened to hit Europe with a 200% tariff on wine, cognac and other alcohol imports. The tariff whiplash and escalation in the trade war have rattled financial markets, sparking a selloff on the stock market, which also contributed to depressing sentiment this month.

Tariffs were mentioned by 48% of the survey’s respondents and were expected to push up prices in the future. Consumers’ 12-month inflation expectations jumped to 4.9%, the highest level since November 2022, from 4.3% in February. The increase, which marked three straight monthly rises of 0.5 percentage points or more, was across all three political affiliations.

Over the next five years, consumers saw inflation running at 3.9%. That was the highest reading since February 1993 and compared with 3.5% in February. There was a sizeable increase among Independents. Expectations of higher prices also rose among Democrats and Republicans.

“Unlike during the pandemic when consumers largely understood the price spikes to be short-lived, it is increasingly evident in the data that consumers see the price pressure today as longer lasting,” said Tim Quinlan, a senior economist at Wells Fargo.

Stocks on Wall Street rebounded after tumbling in prior sessions. The dollar was steady against a basket of currencies. U.S. Treasury yields rose.

Fed officials meeting next week are expected to leave the U.S. central bank’s benchmark overnight interest rate in the 4.25%-4.50% range, having reduced it by 100 basis points since September, and continue to assess the economic impact of the Trump administration’s policies.

Financial markets expect the Fed to resume cutting borrowing costs in June after it paused its easing cycle in January amid a darkening economic outlook.

Economists said it would be hard for policymakers to ignore the persistent rise in inflation expectations.

“Fed officials have argued that as long as inflation expectations remain anchored, tariffs can probably be viewed as having a one-off impact on prices rather than being part of an inflation process,” said Conrad DeQuadros, senior economic advisor at Brean Capital.

“This view does not look credible based on these data.”

The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.

Pressure on consumers is also coming from an unprecedented campaign to drastically shrink the government through tech billionaire Elon Musk’s Department of Government Efficiency, or DOGE, created by Trump, which has slashed funding and fired thousands of federal workers. Some have been reinstated following legal challenges. Agencies had a Thursday deadline to submit plans for large-scale layoffs.

A Reuters/Ipsos poll of Americans conducted March 11-12 showed that 57% of survey participants believe Trump’s moves to shake up the economy are too erratic, and 53% think the tariff war will do more harm than good.

Though the correlation between consumer sentiment and spending has generally been weak, economists said the magnitude of the deterioration in morale was concerning.

“The pullback in confidence is becoming a real threat to consumer spending,” said Bill Adams, chief economist at Comerica Bank. “People who are afraid the economy is headed into a ditch won’t buy new cars or houses, go out to eat or go on vacations.”

U.S. consumer sentiment plunged to a nearly 2-1/2-year low in March and inflation expectations soared amid worries that President Donald Trump’s sweeping tariffs, which have ignited a trade war, would boost prices and undercut the economy.

The deterioration in sentiment and inflation expectations reported by the University of Michigan Surveys of Consumers on Friday was across political party affiliation, with consumers saying “frequent gyrations in economic policies make it very difficult for consumers to plan for the future.”

That mirrors similar concerns in some business surveys. The uncertainty created by Trump’s on- and off-again tariffs as well as an escalation in trade tensions risks derailing the economic expansion. Fears of higher prices, which drove consumers’ long-term inflation expectations to levels last seen in early 1993, create a challenge for Federal Reserve officials as they consider the next steps for monetary policy.

“The jury is back and the verdict is in. Trump 2.0 policies are harming the economy and the future prosperity of America,” said Christopher Rupkey, chief economist at FWDBONDS. “The consumer is frightened and sees sharply higher prices ahead despite the assurances from Washington that trade tariffs are good for the economy.”

The University of Michigan said its Consumer Sentiment Index dropped to 57.9, the lowest level since November 2022, from a final reading of 64.7 in February. Economists polled by Reuters had forecast the index falling to 63.1.

The index has erased all the gains posted in the aftermath of Trump’s election victory in November.

The weakness in sentiment this month reflected a deterioration in expectations for the future across multiple facets of the economy, including personal finances, employment, inflation, business conditions and the stock market.

Republicans recorded a 10% drop in their expectations index, while Independents saw a 12% decrease. Expectations among Democrats tumbled 24%.

“Consumers from all three political affiliations are in agreement that the outlook has weakened since February,” said Surveys of Consumers Director Joanne Hsu.

Trump has slapped a raft of tariffs on a wide range of goods from key trade partners like Canada, China and the European Union, which have responded with duties of their own. Some tariffs have been imposed and then suspended for a month.

Trump on Thursday threatened to hit Europe with a 200% tariff on wine, cognac and other alcohol imports. The tariff whiplash and escalation in the trade war have rattled financial markets, sparking a selloff on the stock market, which also contributed to depressing sentiment this month.

Tariffs were mentioned by 48% of the survey’s respondents and were expected to push up prices in the future. Consumers’ 12-month inflation expectations jumped to 4.9%, the highest level since November 2022, from 4.3% in February. The increase, which marked three straight monthly rises of 0.5 percentage points or more, was across all three political affiliations.

Over the next five years, consumers saw inflation running at 3.9%. That was the highest reading since February 1993 and compared with 3.5% in February. There was a sizeable increase among Independents. Expectations of higher prices also rose among Democrats and Republicans.

“Unlike during the pandemic when consumers largely understood the price spikes to be short-lived, it is increasingly evident in the data that consumers see the price pressure today as longer lasting,” said Tim Quinlan, a senior economist at Wells Fargo.

Stocks on Wall Street rebounded after tumbling in prior sessions. The dollar was steady against a basket of currencies. U.S. Treasury yields rose.

Fed officials meeting next week are expected to leave the U.S. central bank’s benchmark overnight interest rate in the 4.25%-4.50% range, having reduced it by 100 basis points since September, and continue to assess the economic impact of the Trump administration’s policies.

Financial markets expect the Fed to resume cutting borrowing costs in June after it paused its easing cycle in January amid a darkening economic outlook.

Economists said it would be hard for policymakers to ignore the persistent rise in inflation expectations.

“Fed officials have argued that as long as inflation expectations remain anchored, tariffs can probably be viewed as having a one-off impact on prices rather than being part of an inflation process,” said Conrad DeQuadros, senior economic advisor at Brean Capital.

“This view does not look credible based on these data.”

The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.

Pressure on consumers is also coming from an unprecedented campaign to drastically shrink the government through tech billionaire Elon Musk’s Department of Government Efficiency, or DOGE, created by Trump, which has slashed funding and fired thousands of federal workers. Some have been reinstated following legal challenges. Agencies had a Thursday deadline to submit plans for large-scale layoffs.

A Reuters/Ipsos poll of Americans conducted March 11-12 showed that 57% of survey participants believe Trump’s moves to shake up the economy are too erratic, and 53% think the tariff war will do more harm than good.

Though the correlation between consumer sentiment and spending has generally been weak, economists said the magnitude of the deterioration in morale was concerning.

“The pullback in confidence is becoming a real threat to consumer spending,” said Bill Adams, chief economist at Comerica Bank. “People who are afraid the economy is headed into a ditch won’t buy new cars or houses, go out to eat or go on vacations.”