President Donald J. Trump's obsession with imposing tariffs on Chinese imports has introduced unexpected side effects on both consumer and business sentiment, heightening fears regarding economic stability. U.S. consumer confidence plummeted in February, marking its steepest decline in 3½ years as inflation continued trending higher, with a "jump in prices of key household staples like eggs and the expected impact of tariffs.". Businesses shared this sentiment, with nearly all surveyed firms expecting U.S.-China trade tensions to escalate further in 2025, risking higher costs from the economy that control 33% of global manufacturing output. The Conference Board survey highlighted that mentions of trade and tariffs dominated responses, reaching levels unseen since 2019, with deep concerns about the future economic landscape under the weight of protectionist policies.

Under intensifying pessimism, the consequences of tariff-induced price inflation are becoming evident. According to AmCham South China’s survey, about 45% of companies reported market-share losses due to existing trade tariffs, with American firms being the hardest hit—54% experienced declines, including 17% suffering revenue drops exceeding 20%. This climate of obscurity is crippling business expansion plans, where a record 41% of firms indicated no intention to expand operations in China over the next three years. Meanwhile, consumers are tightening their belts, with planned expenditures on big-ticket items like cars and electronics diminishing, a shift toward essential spending instead in fear of prolonged economic uncertainty.

The ripple effects of strained U.S.-China relations and domestic policy shifts have further eroded confidence across sectors, with only one-quarter of respondents expressing hope for improved ties—a sharp drop from previous years. For American companies operating in China, this cautious outlook translates into prudent reinvestment strategies given their historical profitability in the region that may no longer be possible, although it has been for some years now with big players such as Apple moving their major production facility to India and Vietnam. As layoffs mount and federal spending cuts take hold, businesses and households alike brace for slower growth and lots of pain ahead, showing how government policies have sown seeds of doubt that could hinder broader economic recovery efforts.

Source: Reuters, Conference Board

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