Published Time: 08-16-2025, 16:00

American consumers are once again expressing unease about inflation, but spending levels remain steady, helping sustain economic growth. While surveys show declining confidence tied to trade policy uncertainty and rising producer costs, robust employment and household resilience are keeping demand alive.

Inflation Concerns and Consumer Confidence

The University of Michigan reported on Friday that consumer sentiment fell 5% in August to 58.6, reversing four months of gradual improvement. The decline reflects renewed worries over tariffs introduced by President Donald Trump’s administration as part of its trade strategy.

Joanne Hsu, director of the University of Michigan’s survey, noted that “consumers continue to expect both inflation and unemployment to deteriorate in the future,” even though current conditions remain relatively stable.

Expectations for inflation in the year ahead rose to 4.9%, up from 4.5% in July, signaling that households are bracing for higher costs. However, recent history suggests that falling sentiment does not always translate into weaker consumer activity.

The Role of Employment in Sustaining Spending

The labor market remains one of the strongest supports for household spending. Unemployment is currently at 4.2%, according to the Labor Department. With steady job growth and historically low levels of unemployment claims, most Americans still have both the income and confidence to maintain consumption.

Chris Zaccarelli, chief investment officer at Northlight Asset Management, explained in a note that “as long as consumer spending holds up and companies are able to retain workers because of that robust spending, the flywheel can continue to spin, pushing corporate profits and stock prices higher.”

How Businesses Are Managing Tariff Pressures

Since early 2025, tariffs have been a central feature of U.S. trade policy. Economists initially warned that higher import costs could fuel rapid consumer inflation. Yet so far, businesses have adopted strategies to shield consumers from the full impact.

A report from the Federal Reserve Bank of Richmond highlighted measures such as delaying orders, staggering the timing of tariff charges, negotiating cost-sharing with suppliers, and stockpiling inventory ahead of new tariff rounds.

These approaches have allowed companies to contain inflationary pressures, at least temporarily. “Sensing from businesses suggests that the impact of tariffs on their price-setting has been lagged, but it is starting to play out,” Richmond Fed economists wrote.

Still, warning signs are emerging. The Producer Price Index, which measures the costs businesses pay for goods and services, rose 0.9% in July, pushing the annual rate to 3.3%. The figures exceeded economists’ expectations and could signal higher consumer prices in the months ahead.

Consumer Sentiment vs. Spending Behavior

Historically, consumer sentiment has not been a reliable predictor of actual spending. For example, in 2022, sentiment fell to record lows during a 40-year high in inflation, yet consumer spending remained strong. Similarly, in 2023, despite uncertainty surrounding the congressional debt ceiling standoff, households continued to shop at consistent levels.

This disconnect appears to be persisting in 2025. Although confidence has slipped, retail sales data shows that consumers are still actively spending across a variety of categories.

Retail Sales Hold Steady

The Commerce Department reported that retail sales rose 0.5% in July, aligning with economists’ forecasts. Although the pace slowed from June’s upwardly revised 0.9% gain, the figures point to steady consumer demand.

Sales rose notably at car dealerships (up 1.6%) and furniture stores (up 1.4%). Online shopping also grew by 0.8%, boosted by Amazon’s annual Prime Day promotions. Gas stations and department stores reported gains as well, reflecting broader consumer activity.

However, some categories lagged. Home improvement stores saw sales fall 1%, while electronics retailers posted a 0.6% decline. Restaurants and bars also slipped 0.4%, extending a period of subdued performance in the dining sector.

A “control group” measure of retail sales, which excludes volatile categories, rose 0.5% in July, slightly beating economists’ expectations. Even after adjusting for the Consumer Price Index’s 0.2% monthly increase, real spending remained positive at 0.3%.

Bill Adams, chief economist at Comerica Bank, emphasized this resilience, writing, “What consumers do is more important to the economy than what they say.”

Outlook for the U.S. Economy

The U.S. economy continues to depend heavily on consumer spending, which accounts for roughly 70% of total output. While businesses and households have so far absorbed the pressures of tariffs and higher production costs, economists caution that this resilience may not last indefinitely.

If producer costs continue to rise and companies begin passing them onto consumers, inflation could accelerate, putting more pressure on household budgets. At the same time, uncertainty surrounding trade policy could weigh on confidence and business investment.

For now, the combination of strong employment, business adaptability, and steady consumer demand has allowed the U.S. economy to maintain momentum despite policy headwinds. But analysts warn that if inflation expectations continue to climb, spending habits could shift in the months ahead.

Source: CNN – American consumers are getting nervous about inflation again. For now, they’re still spending

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Amazon has clarified it will not be listing tariff-related import charges alongside product prices on its website, despite widespread speculation — and a heated reaction from the Trump administration — over reports suggesting otherwise.

Earlier on Tuesday, a report from Punchbowl News claimed Amazon planned to break out tariff costs “right next to” product prices. The news immediately drew fire from the White House, which labeled the rumored move a “hostile and political act.”

Amazon quickly responded, saying no such change was approved or even in the works for the broader platform. According to spokesperson Tim Doyle, only Amazon’s Haul storefront — a low-cost, newly launched platform — briefly considered showing import costs on select items. But the idea never advanced.

“It was never approved and is not going to happen,” Doyle said.

Still, the White House’s initial reaction was swift and sharp. Press Secretary Karoline Leavitt accused Amazon of aligning with “a Chinese propaganda arm,” adding political fuel to the economic fire. Reports also indicate that President Trump personally called Amazon founder Jeff Bezos Tuesday morning to express his discontent.

By Tuesday afternoon, the mood had shifted. President Trump praised Bezos in front of reporters before leaving for Michigan, saying, “He solved a problem very quickly and he did the right thing. He’s a good guy.”

Bezos, once part of the elite group seated behind Trump at his inauguration, now finds himself — along with other corporate giants — navigating the unpredictability of ongoing tariff battles that continue to shake global markets.

Economists and business leaders have long warned that Trump’s tariffs, along with retaliation from trade partners like China, could increase everyday prices for consumers and heighten inflation. For companies like Amazon, that’s a balancing act between shielding customers and staying transparent about rising costs.

“Companies are always communicating something with us through receipts,” said Rob Lalka, a professor at Tulane University’s Freeman School of Business. He noted that whether it’s city taxes on hotel stays or local fees in Uber rides, itemized charges aren’t new — and Amazon has used similar approaches before, like listing state sales taxes.

Still, breaking out tariff costs next to each product would have been a bold move — and a highly visible one.

While Amazon distanced itself from the idea, some competitors have already gone there. Chinese-owned Temu and Shein, for example, announced price hikes tied to “recent changes in global trade rules and tariffs.” Temu now includes visible import fees on many listings, while Shein assures customers that tariffs are already baked into the final checkout price.

Some items on Temu have reportedly doubled in cost due to added import charges — unless sourced from local warehouses, which remain tariff-exempt.

Although Amazon denied the rumored pricing change, Lalka believes the idea didn’t come out of nowhere.

“The reality is that politics are always being played,” he said. “And when companies change how prices are displayed, it’s not just business — it’s a message.”

With trade tensions still high and tariff policies shifting, expect more companies to quietly adjust how they pass on those costs — even if it’s not shown front and center in your shopping cart.

Source: CNN – Amazon is not planning to break out tariff costs online as White House attacks potential move

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President Donald Trump’s long-anticipated tariffs on Canada and Mexico officially took effect on Tuesday, igniting tensions in global markets and setting the stage for retaliatory measures from the U.S.’s North American neighbors.

New Tariffs and Global Reactions

Starting just after midnight, imports from both Canada and Mexico are now subject to 25% tariffs, with Canadian energy products facing a 10% duty. These measures are part of Trump’s broader trade strategy, which has already sparked significant global reactions.

Meanwhile, the Trump administration doubled the tariff on Chinese imports from 10% to 20% in February, prompting Beijing to retaliate on Tuesday with tariffs of up to 15% on a wide range of U.S. farm exports. Additionally, China expanded restrictions on about two dozen American companies, tightening controls and escalating tensions.

Canada Responds with $100 Billion in Retaliatory Tariffs

In response to the U.S. tariffs, Canadian Prime Minister Justin Trudeau announced a 25% tariff on $155 billion (Canadian) worth of American goods, beginning with an initial $30 billion worth of products. These retaliatory tariffs will remain in place until the U.S. rescinds its trade actions. Trudeau emphasized that Canada is committed to resolving the issue through ongoing discussions, but remains ready to implement further measures if necessary.

While Mexico did not immediately detail its retaliatory actions, it is expected to follow suit in some capacity. The escalating trade conflict has already begun to stir fears of higher inflation and the possibility of a full-scale trade war, as both countries and international markets prepare for a prolonged standoff.

Trump’s Trade Strategy: A Controversial Path to Prosperity

President Trump has been vocal about his belief that tariffs are a crucial tool for revitalizing the U.S. economy. He argued that imposing taxes on imports is the easiest path to national prosperity—despite warnings from mainstream economists about the long-term consequences. Trump said,
“It’s a very powerful weapon that politicians haven’t used because they were either dishonest, stupid, or paid off in some other form. And now we’re using them.”

The tariffs, initially set to take effect in February, were delayed by 30 days to allow further negotiations with Canada and Mexico. Trump has justified the tariffs as a means to combat drug trafficking and illegal immigration from both countries, although they have also been linked to a desire to address the U.S. trade imbalance. Trump has stated the tariffs could be reduced if the trade deficit closes, though this is unlikely to be resolved quickly.

Unpredictability and Economic Volatility

The U.S. tariffs have created a sense of economic uncertainty, with many wondering what moves Trump will make next. Michael House, co-chair of the international trade practice at the law firm Perkins Coie, described the situation as “chaotic” and “unpredictable.” He added,
“We don’t know, in fact, what the president will do.”

The global economy is now facing a fog of uncertainty, as retaliatory tariffs from Canada and China threaten to worsen the situation. Even after Trump’s announcement, Canadian officials remained in contact with their U.S. counterparts, signaling that diplomatic talks are ongoing despite the heightened tensions.

Domestic Reactions and Growing Concerns

The new tariffs have sparked concern among both Democratic and Republican lawmakers in the U.S., particularly those with close ties to industries that will be directly impacted. Senator Susan Collins of Maine expressed concern about how the tariffs could affect Maine’s economy, given the state’s reliance on Canadian processing for products like lobsters and blueberries.

Despite these concerns, Trump has continued to defend his approach, claiming that inflation caused by tariffs would not be as severe as some economists suggest. He pointed to recent business investments, such as the $100 billion commitment from Taiwan Semiconductor Manufacturing Company to produce chips in the U.S., as evidence that his strategy is working.

Impact on U.S. Industries

While some businesses welcome the potential for more domestic manufacturing, others are sounding alarms. Greg Ahearn, CEO of The Toy Association, warned that the 20% tariffs on Chinese goods could be “crippling” for the toy industry, which relies heavily on imports from China. Ahearn noted the sophisticated manufacturing processes involved in producing toys and emphasized that it would take years, not months, for U.S. factories to catch up.

“That can’t be replicated overnight,” Ahearn cautioned, highlighting the challenge of reshoring complex production processes that have been built up over decades.

The Road Ahead: Tit-for-Tat Escalation

As the situation develops, Damon Pike, a trade expert at BDO, suggested the risk of further escalation is high. Both Canada and the European Union have their own lists of potential retaliatory measures ready, setting the stage for a tit-for-tat battle that could drag on for months or years.

With rising tensions and the threat of additional tariffs on industries like automobiles and pharmaceuticals, the world economy faces a period of heightened volatility and uncertainty as President Trump continues to push his trade agenda.

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Recent market movements have raised questions about the relationship between the Federal Reserve’s actions and rising interest rates. The yield on the 10-year Treasury bond recently surged above 4.80%, marking its highest level since 2023. This sudden rise in bond yields has rattled Wall Street, causing stock indexes to slide from their record highs.

On the surface, this might seem paradoxical. The Federal Reserve has cut interest rates three times since September, aiming to provide relief to the economy. Yet, the bond market is behaving in a way that doesn’t seem to align with these cuts. So why is this happening?

The Bond Market Focuses on the Future

While the Fed’s actions influence short-term interest rates, the bond market is more focused on what’s coming next—particularly inflation and economic growth. Investors are concerned that inflation may not be under control and that the economy might not need further rate cuts. This uncertainty is causing bond yields to rise, which is in turn putting pressure on the stock market.

The Fed’s Role and Limitations

Since September, the Federal Reserve has lowered its key interest rate by a full percentage point. The goal is to provide some breathing room to the economy after the Fed had previously raised rates to a two-decade high to combat inflation. However, the Fed primarily controls short-term rates, such as the federal funds rate, which dictates what banks charge each other for overnight loans.

The 10-year Treasury yield, which has the most direct impact on long-term interest rates, is driven largely by investors. While the Fed’s rate decisions are important, investors also consider factors like inflation expectations and future economic performance.

Rising Yields Despite Fed Rate Cuts

Interestingly, the 10-year Treasury yield began to climb in September, just as the Fed started to cut interest rates. The yield rose from 3.65% to over 4.80%, even as the Fed was reducing short-term rates. This rise was driven by growing expectations for both inflation and economic growth, fueled by better-than-expected economic reports. Inflation proved to be more persistent than anticipated, though recent data offered some optimism and helped Treasury yields retract slightly.

A Historical Parallel

A similar situation unfolded in late 2018, but in the opposite direction. At that time, the Fed had been raising interest rates, causing the 10-year Treasury yield to rise. However, by the end of 2018, the 10-year yield began to decline, even as the Fed continued to hike the federal funds rate. Investors correctly predicted that the Fed would eventually pause rate increases to avoid excessive strain on the economy.

The Trump Factor

During President Donald Trump’s election, his policies also impacted interest rates. His proposed tariffs on imports raised inflation concerns, while tax cuts added pressure on the U.S. government’s debt. As a result, investors demanded higher interest rates to offset the increased risk posed by Trump’s economic policies.

The Fed’s Revised Outlook for 2025

Looking ahead, the Federal Reserve’s plans are causing uncertainty. Originally, the Fed projected that it would cut interest rates four times in 2025. However, it has since revised its forecast, suggesting that only two cuts may be possible. Market traders are now speculating that there may be no rate cuts at all in 2025.

Despite recent positive inflation data, Wall Street remains cautious. “It will likely take several months of slowing inflation before the Fed—and the market—start thinking about another rate cut,” said Gary Schlossberg, market strategist at Wells Fargo Investment Institute.

Conclusion

While the Fed’s actions to lower interest rates aim to ease economic pressures, the bond market is signaling concern about inflation and economic growth, driving up long-term interest rates. This disconnect highlights the complexity of economic forecasting and the different factors influencing both the Fed and investors. For now, the uncertainty in the market suggests that investors will continue to closely monitor inflation trends and the Fed’s next moves.

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Wall Street’s major indexes began the shortened Black Friday trading session with slight gains, positioning themselves for a strong finish to the month. Investors were closely monitoring retail stocks, which were in the spotlight as the holiday shopping season kicked off with Black Friday discounts expected to attract millions of shoppers.

Adobe Analytics projected that online sales on Black Friday 2024 would reach a record-breaking $10.8 billion, marking a 9.9% increase from last year.

Shares of major retailers were on the rise: Target climbed 1.5%, Hasbro gained 3.7%, Costco rose 0.8%, Walmart edged up 0.4%, and Nike added 0.5%.

Ross Mayfield, an investment strategist at Baird, noted that retailers, heavily reliant on imports, face challenges with inventory levels and tariffs. Despite these concerns, he emphasized that the Black Friday and Cyber Monday sales looked promising.

By 9:49 a.m., the Dow Jones Industrial Average was up 140.39 points (0.31%) at 44,862.45, the S&P 500 had gained 13.80 points (0.23%) at 6,012.54, and the Nasdaq Composite rose 47.87 points (0.25%) to 19,108.35.

Technology stocks, including Nvidia and Apple, helped boost the S&P 500, while the industrial and financial sectors supported the Dow. Chip stocks rebounded from earlier declines, sending the Philadelphia Semiconductor Index up by 1.3%.

The small-cap Russell 2000 index rose 0.7%, benefiting from a retreat in Treasury bond yields from their recent highs.

Earlier this week, Wall Street’s major indexes had closed lower after data showed persistent inflation, leading investors to believe the U.S. Federal Reserve might take a cautious approach on interest rate cuts in 2025. Still, the three main indexes were on track for monthly gains, with the S&P 500 set for its biggest monthly rise since November 2023. The Russell 2000 index hit a record high earlier in the week and was on course for its best monthly performance this year.

Equity markets also gained momentum from Donald Trump’s victory in the U.S. presidential election earlier this month, as well as his Republican Party securing control of both houses of Congress. Investors speculated that Trump’s pro-business policies could spur economic growth and improve corporate performance, though concerns remained about inflationary pressures and their potential impact on global growth.

Traders anticipate the Federal Reserve will lower borrowing costs by 25 basis points in December but expect a pause in rate cuts in January, according to CME Group’s FedWatch tool.

In the cryptocurrency space, stocks rose as Bitcoin surged 2.5%, trading around $97,000. MicroStrategy gained 4.3%, MARA Holdings climbed 6.2%, and Bit Digital jumped 7.7%.

In a major setback, Applied Therapeutics saw its stock plunge 75% after the U.S. Food and Drug Administration declined to approve its drug for treating a rare genetic metabolic disease.

Given the lighter trading volumes following Thursday’s Thanksgiving holiday, analysts expect stock movements to be more volatile. On the NYSE, advancing stocks outnumbered decliners by a ratio of 3.27-to-1, while on the Nasdaq, advancing issues led decliners by 2.14-to-1.

The S&P 500 recorded 19 new 52-week highs, with no new lows, while the Nasdaq Composite saw 75 new highs and 10 new lows.

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Economic Concerns: Higher Costs and Inflation

Tariffs, which increase the price of foreign goods, can provide short-term protection for U.S. manufacturers. However, economists caution that they can also contribute to inflation, which may hurt other sectors of the economy.

Gary Schlossberg, a global strategist at Wells Fargo Investment Institute, acknowledged the protective effect of tariffs but noted that the resulting inflation could hurt manufacturers who rely on imported materials. “Depending on where you are in manufacturing, inflation could work against you,” he said.

During his first administration, Trump imposed tariffs on products like solar panels, washing machines, and certain metals. These measures were maintained by President Biden, with additional tariffs on Chinese goods. Now, Trump is proposing even more aggressive tariffs: 60%-100% on Chinese imports and a universal tariff of up to 20% on goods from other countries.

“We’ll lead an American manufacturing boom,” Trump said during a September speech in Georgia, predicting that tariffs would incentivize companies to build within the U.S.

However, these measures come at a cost. The Peterson Institute for International Economics estimates that tariffs could cost a typical American household more than $2,600 annually. According to the National Retail Federation, the tariffs could reduce American consumers’ spending power by $46 billion to $78 billion each year. For instance, a $50 pair of athletic shoes could increase to $64, and a $2,000 mattress set could rise to $2,190.

Impact on Manufacturers and Consumers

While tariffs might offer relief to some manufacturers, the rising costs could be passed on to consumers. For example, Matt Bigelow, president of Vermont Flannel, which sources fabric from Europe, expressed concern about the effect of tariffs on consumer prices, saying that inflation is already a real issue for his company.

Stephen Liquori, CEO of Goodwear USA, a Massachusetts-based apparel manufacturer, acknowledged that tariffs could level the playing field by raising the cost of imported goods. However, he questioned their long-term effectiveness, noting that some products are simply not feasible to produce domestically. “I’m realistic about that. I’m not going to say, ‘Make everything in America,’” he said.

Optimism for Jobs

Despite inflation concerns, some manufacturers are optimistic about the potential job creation that could result from expanded tariffs. Drew Greenblatt, president of Marlin Steel, a wire and sheet metal products manufacturer, believes that tariffs will bring manufacturing jobs back to the U.S. His company, which sources American steel, lost out on contracts due to lower-cost imports. “I’m going to start winning all those jobs,” Greenblatt said, predicting the need to double his staff if tariffs take effect.

A study by the Coalition for a Prosperous America suggests that a universal 10% tariff could create up to 2.8 million jobs. However, a 2020 report by the Brookings Institution found that the job gains in industries like steel were offset by losses in sectors dependent on imports or facing retaliatory tariffs.

Bayard Winthrop, CEO of American Giant, a U.S.-based apparel manufacturer, expressed support for a gradual approach to tariffs. While tariffs could boost his company, he cautioned that a sudden 20% tariff could be harmful to the economy. “The benefit is it will begin to put in place some industrial capability in the U.S. that I think is desperately needed,” Winthrop said.

Strategic Tariffs for National Security

Scott Paul, president of the Alliance for American Manufacturing, advocates for a strategic approach to tariffs, especially on Chinese products. He sees tariffs as an essential policy step to reduce the U.S.’s economic dependence on China, calling it a critical move for national security.

Source

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