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American consumers – and their wallets – are the engine of the economy. But they’re now showing the strain of inflation, President Donald Trump’s tariffs and a stock market plunge.
That’s a problem because consumer spending accounts for roughly 70% of the US economy.
Consumers proved resilient throughout Joe Biden’s presidency. They powered through pandemic-driven inflation and the higher interest rates brought in to control it, thanks to a robust labor market and rising wages that helped buttress spending and drive the economy.
Biden entered the White House in the depths of the pandemic and left office with strong economic growth, monthly job gains for the entirety of his presidency and the stock market at record highs. But he also presided over a steep rise in housing, child care and other household costs that contributed to Trump’s victory in 2024.
The Trump administration has said it’s trying to “turn back the economic plague unleashed by the Biden Administration.”
But American business leaders are now sounding the alarm about consumers freezing up, in part due to Trump’s policies. Consumer confidence last month registered its biggest monthly decline since 2021, according to the Conference Board’s Consumer Confidence Index. Airlines are warning that consumer demand for travel is slowing, and shoppers are buying less clothing, home decor and other goods.
Trump’s tariffs have rattled consumers, businesses and investors, but the president has stayed the course, saying that his tariffs could cause “a little disturbance.” In an interview with Fox News on Sunday, Trump declined to rule out the possibility of a recession, contributing to a stock market selloff this week.
In early March, Trump imposed a blanket 25% tariff on Mexico and Canada after delaying them for a month — then quickly lifted tariffs for all Canadian and Mexican imports that fall under a North American free trade agreement after discussions with those countries’ officials. Meanwhile, Trump doubled tariffs on China to 20% on top of existing duties.
The Trump administration has warned that it’s not done with its overhaul of US trade policy, promising to deliver reciprocal tariffs — tariffs that match other countries’ dollar for dollar — next month. On Tuesday, Trump said in a social media post that he would add a 25% tariff on Canadian electricity and a 50% tariff on all steel and aluminum imported from Canada.
Tariffs threaten to raise the prices Americans pay for a wide array of goods, and many economists say they will slow US economic growth.
“We’ve never seen this kind of breadth of tariffs. This, of course, impacts the whole (retail) industry,” Best Buy CEO Corie Barry said on a call with analysts last week. Best Buy expects its suppliers to pass along some tariff costs to retailers — “making price increases for American consumers highly likely,” she said.
Trump’s tariff policy also comes as prices pick back up. Inflation heated up to 3% last month for the first time since June.
It’s all taking a toll on US consumers and businesses.
Delta Air Lines slashed its profit outlook Monday, warning that deteriorating corporate and consumer confidence is hurting travel demand.
“The outlook has been impacted by the recent reduction in consumer and corporate confidence caused by increased macro uncertainty, driving softness in Domestic demand,” Delta said in a filing with the Securities and Exchange Commission.
Retailers are also getting hit hard. The S&P 500’s retail index, which tracks a broad range of retail companies, has dropped 13% in 2025 and fallen to its lowest level in more than a year.
Target, Macy’s, Kohl’s, Home Depot and other chains have warned investors of a bumpy year ahead, with consumers dialing back spending on non-essential items.
“Persistent economic uncertainty has consumers taking a cautious approach to spending, particularly in discretionary categories,” Target CEO Brian Cornell said on an earnings call last week. The company said that “tariff uncertainty” will impact its profit this quarter.
Kohl’s (KSS) said Tuesday that sales could drop as much as 6% this year, sending its stock down 25%.
The economic uncertainty has taken the biggest toll on lower-income consumers, Kohl’s CEO Ashley Buchanan said Tuesday on a call with analysts.
Consumers making less than $50,000 a year are “pretty constrained,” she said, and “it’s also pretty, pretty challenging” for customers making less than $100,000 annually.
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