Splurge or save? Americans struggle as Trump tariffs hit economy

Just days after Donald Trump won the U.S. presidential election, Amber Walliser stockpiled goods, spending $2,000 on appliances she believed would become more expensive due to new White House taxes on imported goods. This reflected the concerns at the time about potential trade policy changes and the expectation of rising prices. She wanted to get ahead of the potential price increases.

However, this was just a brief spending spree. Today, her family is tightening its belt, worried about job security and a possible recession. Experts believe that the possibility of a recession has increased due to President Trump's tariff policies. This means they won't be buying a new car or taking a big vacation this year, and they've even put their plans to have a second child on hold.

"We are saving as much as possible, just hoarding cash, trying to grow our emergency fund," said Amber, a 32-year-old accountant from Ohio. Amber's concerns are echoed across the United States, as the White House's tariffs and other policy changes have shaken the stock market, triggered corporate turmoil, and fueled inflation concerns. This uncertainty is affecting consumer confidence and spending behavior.

Officials at the U.S. Federal Reserve (the Fed) will discuss this tricky situation at their interest rate meeting on Wednesday. The Fed is responsible for maintaining price and employment stability, typically lowering borrowing costs to support the economy or raising them to slow price increases, as it did when prices soared in 2022. Analysts widely expect the Fed to hold interest rates steady on Wednesday, but there is much disagreement about expectations for the coming months, as tariffs could raise prices and slow economic growth.

"Their job has become more difficult," said Jay Bryson, chief economist at Wells Fargo. Fed Chairman Jerome Powell noted in a speech earlier this month that in recent years, although the economy has performed well on many mainstream indicators, sentiment surveys have not been good at predicting spending decisions because of poor public perception. He said policymakers can wait and see the overall impact of White House policy changes before responding. However, households are now reacting to this uncertainty.

After his investments were hit by the recent stock market sell-off, Dave Gold created a budget and started cutting expenses. He canceled Netflix, challenged himself to avoid shopping on Amazon for a month, and scaled back travel, successfully cutting his spending in half. "It's hard to plan and be confident about what's going to happen next month," said Dave, 37, who lives in Wyoming and works in the financial industry. "I think it's time to tighten our belts and protect ourselves in case something happens."

Dave is not the only American cutting back on spending. Retail sales also fell last month, and companies from Walmart to Delta Air Lines have warned that demand is slowing. Meanwhile, job growth has slowed, and the stock market is currently at its lowest level since September. The University of Michigan's consumer confidence survey this month showed that concerns about the job market have soared to their highest level since the Great Recession, and household expectations for long-term inflation have also risen sharply, marking the largest monthly increase since 1993.

These are unsettling signals for the United States, as consumer spending accounts for about two-thirds of the U.S. economy. "It's not that consumers are collapsing, but we're seeing some cracks," Mr. Bryson said, who believes the odds of a recession are one in three, up from one in five at the start of the year. "If the consumer pulls back...the whole economy goes with it," he said.

White House officials acknowledge the possibility of "a little disruption" while promising short-term pain will bring long-term gains. But polls show that Trump's handling of the economy is a focus of public concern, especially for Democrats and independents, and increasingly for Republicans as well. Jim Frazer, a software engineer who did not vote for Trump, said the government's assurances did not alleviate his concerns because he saw policies changing every hour, the stock market falling, and prices of necessities like eggs rising.

Around the end of last year, the 49-year-old, who lives in Nebraska, bought a new phone and a TV, betting that these goods would be affected by tariffs that Trump said he planned to impose on goods imported from China. However, recently he has been working to cut costs, both in response to rising costs and because he has been frightened by the Trump administration's rhetoric—not just tariffs, but other moves, such as annexing Canada as the 51st state. He and his wife recently put a hold on plans to replace an old loveseat and scaled back ambitions to renovate a bathroom.

"I just feel like right now, we need to keep our money safe," he said. "It feels like we're heading toward something where we have to be prepared." This statement sums up the current mindset of many Americans, who are preparing for future uncertainty.