American consumers and businesses are increasingly anxious about the economy, driven by fears of rising inflation and tariffs under President Trump.

Consumer sentiment has significantly declined, with the Conference Board reporting a seven-point drop in February 2025, bringing the index down to 98.3 points, the lowest since August 2021.

While the US Federal Reserve aims for a 2% inflation rate, the actual inflation rate was recorded at 3.0% in January 2025, indicating a significant gap from the target.

Consumer spending constitutes about 70% of the US economy; therefore, continued spending is crucial to avoid a recession.

Despite negative sentiment, historical data suggests that such gloom doesn't always correlate with a decrease in consumer spending, as seen in mid-2022 amidst high inflation.

Mark Zandi, chief economist at Moody's, warns that if consumer confidence continues to decline over the next three months, it could lead to significant economic issues.

As initial signals of a recession emerge, President Trump faces challenges in fulfilling his promise to lower prices and enhance prosperity.

Walmart has warned of potential slowdowns in sales and profit growth, linking this to prolonged inflation and high borrowing costs affecting lower-income consumers.

This drop in consumer confidence is the largest since August 2021, and the National Federation of Independent Business has also reported high levels of uncertainty.

Inflation expectations among consumers have risen sharply, with anticipated inflation for the next twelve months now at 6.0%, up from 5.2% in January 2025.

Rising food prices, particularly for essentials like eggs, are contributing to inflation concerns, alongside anticipated impacts from tariffs imposed by Trump.

For the first time since June 2024, the consumer expectations index fell below 80, a threshold typically indicating an upcoming recession.