Ongoing tariff threats from Washington and potentially sweeping government job cuts have darkened consumers’ mood and may be weighing on an otherwise mostly healthy economy.

Summary

A government report warns that Trump’s tariffs on Canada, Mexico, and China, along with federal job cuts, could hurt consumers and slow the economy.

While inflation has cooled to 2.5%, tariffs may drive prices higher, prompting companies to raise costs and cut jobs.

Consumer spending fell 0.2% in January, the most since February 2021, even as their incomes rose. Businesses fear volatility with growing economic uncertainty, with industries bracing for price hikes.

Economists warn tariffs could push inflation up 0.8 percentage points, potentially derailing economic stability and eroding consumer confidence.