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Tariffs on goods from Canada and Mexico are on schedule to be implemented next week after a 30-day reprieve, President Trump signaled on Monday against a backdrop of rising anxiety among investors and consumers about the potential impacts of a trade war.
Consumer confidence registered the largest monthly decline in February in more than 3 years, The Conference Board reported Tuesday. Recent increases in the price of goods like eggs and fears that tariffs could make things worse helped drag the board’s Consumer Confidence Index down 7 points from January to February.
The Conference Board’s Expectations Index — a gauge of the short-term outlook for income, business and labor market conditions — dropped below 80 for the first time since June, a threshold that usually signals a recession ahead, the think tank reported.
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Consumers now think inflation will climb to 6 percent in the year ahead, up from 5.2 percent in January, Conference Board economist Stephanie Guichard said, in a statement.
Stephanie Guichard
“This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs,” Guichard said. “There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current Administration and its policies dominated the responses.”
The University of Michigan Index of Consumer Sentiment also registered a 9.8 percent drop from January to February — although confidence did not slip among Republicans who support President Trump’s economic agenda.
Since taking office, Trump has increased duties on goods from China by 10 percent and announced expanded tariffs on steel and aluminum imports currently set to take effect in March.
President Trump issued executive orders on Feb. 1 to increase tariffs on goods from Canada and Mexico by 25 percent. But those tariffs, which were originally set to take effect on Feb. 4, were quickly put on hold for 30 days to allow time for negotiations.
During a press conference with French President Emmanuel Macron on Monday, Trump said the tariffs on Canada and Mexico “are going forward on time and on schedule,” implying that they’ll take effect March 4.
While that promise could be part of Trump’s negotiating strategy, homebuilders could soon be paying 40 percent duties on Canadian wood if the new tariffs are implemented on top of the 14.5 percent duty already in place on Canadian lumber, the National Association of Home Builders (NAHB) has warned.
Canada had put the U.S. on notice that it would impose 25 percent tariffs on $155 billion in American goods if Trump followed, and Mexican President Claudia Sheinbaum indicated that Mexico would also retaliate.
Interest rates have been climbing due to investors’ fears that the Trump administration’s plans to impose tariffs, cut taxes and deport millions of immigrants could fuel inflation.
But that trend has reversed in recent weeks, as some investors weigh the potential for a slowdown and seek the safety of bonds and mortgage-backed securities. Increased demand for bonds and mortgage-backed securities drives their prices up and yields down.
Since hitting an all-time high of 20,204 on Dec. 16, the NASDAQ composite index is down nearly 6 percent, closing at 19,026 Tuesday. Yields on 10-year Treasurys, a barometer for mortgage rates, have come down half a percentage point from a 2025 peak of 4.81 percent on Jan. 14.
Samuel Tombs
“The Conference Board’s survey mirrors the Michigan survey in showing that consumers’ confidence has deteriorated sharply in the face of threats to impose large tariffs and to slash federal spending and employment,” Pantheon Macroeconomics Chief U.S. Economist Samuel Tombs said in a note to clients Tuesday.
Forecasters at Pantheon expect the Federal Reserve to cut short-term rates three times this year, by a total of 75 basis points, or three-quarters of a percentage point.
The CMEFedWatch tool, which tracks futures markets to predict the probability of future Fed moves, showed investors on Tuesday saw a 75 percent chance that the central bank will cut rates twice this year, up from 44 percent on Feb. 18.
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