CFPB turmoil and tariff uncertainty add pressure to US consumer outlook ahead of key May data
US consumers expressed heightened concern over rising prices due to tariffs.
This was reflected in the University of Michigan's preliminary consumer sentiment index for May, which dropped to 50.8 from 52.2 in April.
According to CNBC, this marks the second-lowest reading on record after June 2022.
The survey found that year-ahead inflation expectations rose to 7.3 percent from 6.5 percent, while long-term expectations increased to 4.6 percent from 4.4 percent.
Joanne Hsu, director of the Surveys of Consumers, stated that “tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60 percent in April,” noting that “uncertainty over trade policy continues to dominate consumers’ thinking about the economy.”
As reported by USA Today, while recent inflation data showed some relief—April’s consumer and producer price indices came in below estimates—concerns remain about future cost hikes.
The Budget Lab at Yale forecasts shoe prices could increase 15 percent and apparel prices 14 percent in the short term due to 2025 tariffs.
The same report, released on May 12, indicated an average 1.7 percent increase in the price level from all tariffs enacted in 2025 through that date, with a potential US$2,800 loss per household.
According to the Budget Lab, even with a 90-day pause in most US–China tariffs announced May 12, the average effective US tariff rate stands at 17.8 percent—still the highest since 1934.
Without the recent pause, it would have reached 27.6 percent.
Economists told USA Today that many price increases haven’t yet appeared due to pre-tariff inventory but warned of possible spikes by June or July in categories like footwear, apparel, toys, and small appliances.
Jason Miller of Michigan State University told USA Today that consumers could expect double-digit price increases on toys, car seats, strollers, and household goods.
The Toy Association has asked for tariff relief, while major retailers like Walmart have already begun raising prices.
Hallmark confirmed in a statement that it increased prices on imported gift and ornament products in early May due to the economic climate.
Charles Ballard, professor emeritus of economics at Michigan State University, said the May 12 US–China tariff pause reduced economic damage by 40 percent but that “tariffs remain much more restrictive than what was in place months ago.”
He also warned that the volatility in tariff policy has left American businesses facing significant uncertainty about costs and supply chains.
Wolverine Worldwide, which owns brands such as Merrell and Saucony, cited tariff uncertainty in withdrawing its 2025 outlook.
KPMG’s May 13 outlook report noted that the Federal Reserve may delay interest rate cuts until December due to inflation and slowing US economic growth.
Meanwhile, concerns extend beyond consumer prices.
According to The Guardian, internal staff at the Consumer Financial Protection Bureau (CFPB) expressed fears that attempts by the Trump administration to dismantle the agency could undermine its ability to respond to an economic crisis.
Staff alleged that thousands of jobs were at risk and warned that the agency’s rollback of regulatory guidance documents could leave consumers vulnerable to unfair financial practices.
Jonathan McKernan’s stalled nomination to head the CFPB and interim director Russ Vought’s capped term have raised internal suspicions.
An anonymous CFPB attorney told The Guardian, “The one thing we were created to do we can’t do – at a time when we’re most needed.”
Employees warned that removing protections, including rules on medical debt in credit assessments, could harm consumers amid financial uncertainty.
Despite no official response from the White House or CFPB, The Guardian reported that the agency remains in a state of internal upheaval.
Staff told the publication that they were committed to protecting consumers, having returned over US$21bn to Americans since the CFPB’s creation, and fear losing the ability to hold financial institutions accountable.
The final University of Michigan consumer sentiment index for May is expected on May 30.
Analysts are watching closely to see if the tariff pause between the US and China will improve consumer sentiment or if inflation expectations will continue to rise.
