U.S. Consumers Remain Relatively Unscathed by Tariff Drama (So Far)

The annual inflation rate as measured by the Bureau of Labor Statistics’ Consumer Price Index fell to 2.3% in April, its lowest reading since 2021. That same month, the ongoing trade war seemed to reach its pinnacle with the Trump Administration’s "Liberation Day” announcement of 10% blanket tariffs and steeper reciprocal tariffs for most U.S. trading partners. This news and subsequent tit-for-tat trade war escalations with China ramped up concerns for the U.S. economy. Consumer sentiment trended steadily lower from January through April, and the search term “recession” hit its second-highest level since mid-2022 on Google. Nevertheless, factors such as front-loaded shipments to boost inventory ahead of tariff implementation and rollbacks and delays of tariff policies have blunted the actual price effects so far. 

Morning Consult data indicates that when it comes to actual purchases and future price expectations, consumers’ viewpoints remain anchored in their lived experience. Tariff impacts have not yet triggered elevated surprise over prices paid on most purchases, and these relatively muted effects seem to be holding down consumers’ expectations that these price increases will, in fact, materialize. 

Despite tariff concerns, inflation expectations only slightly increased

Despite widely shared concern about tariffs and the associated impact on inflation, Morning Consult’s measure of consumers’ inflation expectations–developed in partnership with the Cleveland Federal Reserve Bank–registered only a modest escalation in recent months. Unique from other inflation expectations trackers, the ICIE gauges expectations for year-out price increases indirectly, by asking respondents how much their earnings would need to increase over this period to maintain their current purchasing power. Despite most consumers believing that tariffs are inflationary, and tariff awareness seemingly being top-of-mind for many in recent weeks, the highest point hit by the ICIE so far in 2025 (5.7% in the week ending April 12) was less than 0.2 percentage points higher than the metric’s average level over the final three months of 2024. In other words, tariffs implemented so far have done relatively little to move the needle on year-ahead inflation expectations.

The inflation expectations trend observed in the ICIE is similar to that shown in the New York Federal Reserve Bank’s measure, which tracks a median estimate for year-ahead inflation among a monthly sample of 1,300 adults. Conversely, the University of Michigan’s inflation expectations metric showed a dramatic spike in April. The University of Michigan figure is calculated using a mean value. It has a relatively small sample size (typically under 1,000 per month), so a small number of ultra-high estimates could theoretically lead to much higher upside volatility compared with the NY Fed’s median-based estimate or Morning Consult’s ICIE, which has a higher sample size (over 10,000 per week on average) and utilizes a trimmed mean that mitigates the impact of outliers. 

On-the-ground price experience may be pinning down price expectations

It may seem somewhat contradictory that consumers are simultaneously expressing great concern about the inflationary impacts of tariffs while maintaining relative stability in their price expectations. One possible explanation for this dynamic is that their recent experience purchasing goods and services has a stronger influence on their future projections than news headlines warning of tariff impacts. Morning Consult’s Price Surprise index for all items excluding housing, which measures the net share of consumers encountering a higher-than-expected price on prospective purchases, decreased in April to its lowest level since tracking began in 2022.

While future price expectations per the ICIE tend to correlate with annual CPI growth in the same period (.63 since ICIE tracking began), they have an even higher correlation with the trailing 3-month average Price Surprise (.85), which incorporates both an indication of how prices are evolving as well as a psychological element of how consumers feel about these prices. Intuitively, this relationship makes sense: Consumers purchasing a given item who notice a higher-than-expected price may naturally infer that this good or service is getting more expensive, and project forward that perceived upward trend. Key to that statement is that consumers must notice the price increases in order to internalize them; the slightly weaker correlation between CPI and inflation expectations may be because certain price changes may not immediately penetrate the consumer psyche in a way that shifts personal inflation forecasts.

Most category-level price expectations remain muted as well

The remarkably small increase in inflation expectations despite the tariff-related tumult in April also held at the category level. The share of adults expecting price increases over the next 12 months for a given category was closer to recent lows than recent highs for nearly all 13 categories tracked by Morning Consult, with clothing and electronics standing out as the only two exceptions. These goods categories are among the top consumer products that rely most heavily on imported goods, with many originating in China, and would logically be among the most impacted by tariffs. Indeed, when consumers in a separate survey were asked whether they expected tariffs to increase prices on many of these categories, the shares of affirmative responses per category closely mirrored the 12-month price increase shares. 

However, the shares of adults expecting price increases for these items as of April were well below their historical maximums, which–similar to inflation expectations overall–peaked at a time when observed inflation and price surprise was also peaking. Consequently, category-level price expectations–whether from tariffs or for other reasons–may have room to grow as actual price changes become more prevalent.

Consumers will “believe it when they see it” when it comes to tariff-related price hikes

While recent news on tariffs, trade wars and economic prospects overall coincide with strong movements in measures like consumer sentiment and equity markets, these looming threats have been shrugged off by consumers when it comes to price expectations, for which they seem to assign a higher weight to lived experience. Recent trade deal announcements, especially with China, are a positive sign that the total hit from tariffs over the next year will be substantially less than what was initially announced. However, the impact will not be zero; tariffed goods are already being imported and the timeline on when and if additional trade deals will be reached, not to mention the details of those trade deals, remains uncertain. As tariffs' impacts increasingly filter through to consumer prices, the relationships in Morning Consult’s data suggest that Price Surprise and inflation expectations will increase. 

The fact that consumers are not currently anticipating dramatic price increases, including at the product level, may be a positive sign. Anchored inflation expectations are a key concern for the Federal Reserve as they determine interest rate movements this year. However, modest price expectations among consumers may also be a challenge for retail businesses that end up being substantially impacted by tariffs, as it may increase consumer pushback against these price hikes that, as of April, they seemingly doubt will materialize. Furthermore, the apparent link between observed inflation, price surprise, and future expectations suggests that overall and category-level price expectations may be vulnerable to an upward shift as consumers increasingly digest tariff impacts in their lived experience.