The Commerce Department reported on Tuesday that consumer spending fell more than expected in May, following the rollout of tariffs by President Donald Trump. Sales were down 0.9% while the consensus estimate by Dow Jones consensus had expected a 0.6% drop. Sales were also down in April.
Heather Long, chief economist at Navy Federal Credit Union, told CNBC, “Families are wary of higher prices and are being a lot more selective with where they spend their money.”
Auto sales—down 3.5%—were one of the worst-hit areas along with auto parts. That is one of the areas squarely in the targets of Trump’s tariffs. In March, Trump announced a 25% tariff on imported cars and car parts, and even though he has pulled back on some of those costs since, auto manufacturers are expected to pass on their increased costs to consumers.
Other areas experiencing sales declines: restaurants, building materials, and garden stores.
The bad economic news comes just a week after the World Bank downgraded the global economic forecast, citing Trump’s tariffs. The bank has projected that the U.S. economy will grow half as fast in 2025 as it did in 2024, when President Joe Biden was in office.
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Recent evidence also shows that the domestic job market is being hurt by tariff tension. The data on unemployment claims released on June 5 showed an increase in Michigan, which is particularly reactive to auto industry and manufacturing issues.
Trump infamously said that trade wars are “good, and easy to win” but in his two terms in office he has failed to formulate a winning strategy. Trump has repeatedly lied and claimed that tariffs are paid by other countries and that the costs are not passed on to U.S. consumers, but this is completely untrue and not how economics works.
Trying to spin negative news about how his tariffs are expected to increase the costs of basics like children’s toys and dolls, Trump said kids just shouldn’t get toys.
“I don’t think that a beautiful baby girl needs—that’s 11 years old—needs to have 30 dolls,” Trump told “Meet the Press” in May. “I think they can have three dolls or four dolls because what we were doing with China was just unbelievable. We had a trade deficit of hundreds of billions of dollars with China.”
Since putting the tariffs into action, Trump has said he will negotiate a series of “deals” with each nation. But this has so far been a failure, with Trump announcing fake “deals” with countries like China while consumers deal with the fallout. And because he has rescinded many of those deals Wall Street traders have started referring to it as TACO, or “Trump always chickens out.”
Meanwhile, China has taken advantage of the artificial barriers to international trade that Trump has erected and is flooding global markets with even more products. Thanks to Trump, many around the world would rather do business with China instead of American businesses buckling under Trump’s tariff pressure.