The latest economic data suggests that the looming threat of U.S. President Donald Trump’s proposed tariffs is beginning to take a toll on business confidence, fueling inflation expectations and shaking investor sentiment. As the trade conflict escalates, its effects are becoming more apparent in key economic indicators, impacting industries ranging from manufacturing to housing.
Tariff Drama Weighs on Markets
For the past two weeks, tariff-related concerns have dominated Wall Street headlines, and the latest development added to investor anxiety. On Tuesday, Trump signaled that he would likely impose 25% tariffs on imports of cars, semiconductors, and pharmaceuticals, set to take effect on April 2. These proposed levies follow earlier tariff measures, including a 10% tariff on Chinese imports, a now-delayed 25% tariff on imports from Mexico and Canada, and a broad 25% tariff on all steel and aluminum entering the U.S. Additionally, the administration has begun reviewing trade relations with other nations, considering reciprocal tariffs on a country-by-country basis.
The growing trade tensions are already having an impact. According to JPMorgan’s chief economist Michael Feroli, the uncertainty surrounding tariffs is beginning to manifest in business data. “One side effect of this saber-rattling may have appeared in this week’s economic surveys, which show a worsening outlook, in some cases directly tied to trade concerns,” Feroli noted.
Economic Indicators Show Strain
Fresh data from S&P Global’s flash U.S. PMI readings on Friday revealed troubling signs for the economy. The report indicated that new order growth weakened sharply in February, while business expectations for the year ahead slumped, driven by mounting concerns over federal trade policies. The headline output index dropped to a 17-month low, reflecting a near-stalling of business activity. Particularly concerning was the first contraction in the services sector in over two years.
On the manufacturing side, the output index ticked slightly higher, but analysts warned that the uptick was likely temporary. S&P Global attributed part of the increase to “front-running tariffs,” where businesses accelerate production in anticipation of future trade restrictions.
Meanwhile, inflation expectations are rising. The University of Michigan’s February consumer survey showed long-term inflation expectations climbing to 3.5% from 3.2% in January—the largest monthly jump since May 2021. Analysts believe trade concerns contributed to this increase.
Impact on Wall Street and Housing Market
Friday’s economic data helped fuel a sharp selloff on Wall Street. The Nasdaq Composite fell more than 2%, while the S&P 500 posted its worst intraday performance since mid-December 2024. The declines reflected growing fears that tariffs could lead to prolonged economic disruptions, affecting corporate profits and consumer spending.
The housing market is also feeling the pressure. Builder confidence in newly constructed single-family homes fell to a five-month low in February, according to the National Association of Home Builders (NAHB). “Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023,” said NAHB chairman Carl Harris.
With a significant share of appliances and softwood lumber sourced from international markets, home builders are increasingly concerned about rising costs. “With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over tariffs has builders further concerned about costs,” added NAHB chief economist Robert Dietz.
Looking Ahead
As the focus of tariff negotiations shifts from border issues to deeper economic concerns—such as trade deficits, industry protection, and regulatory changes—the risk of long-term trade restrictions appears to be rising. Economists warn that this uncertainty could weigh on sentiment, slow economic growth, and push inflation higher in the coming months.
