US consumer confidence rebounds as trade tensions ease

People shop at a Walmart store in Rosemead, California, the United States, on May 15, 2025. [Photo/Xinhua]

Consumer confidence saw a stronger-than-expected rebound in May, breaking a five-month streak of declines that had pushed sentiment to its lowest level since the COVID-19 pandemic.

The improvement came even as businesses continued to warn about potential price hikes linked to tariffs, despite U.S. President Donald Trump's recent moves to ease trade policies.

According to the Conference Board, U.S. consumer sentiment improved across all age and income groups, signaling a broad recovery in outlook. The shift coincided with a trade talk earlier this month between the U.S. and China that significantly reduced tariffs between the two countries. That deal triggered a rally in the stock market and prompted some Wall Street firms to scale back their recession forecasts.

"The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards," Stephanie Guichard, a senior economist at the Conference Board, said in a release.

"The monthly improvement was largely driven by consumer expectations as all three components of the Expectations Index-business conditions, employment prospects, and future income-rose from their April lows. Consumers continued to express concerns about tariffs increasing prices and having negative impacts on the economy, but some also expressed hopes that the announced and future trade deals could support economic activity," Guichard added.

The joint statement on U.S.-China economic and trade meeting in Geneva was one in a series of steps the Trump administration has taken to ease trade tensions. In recent weeks, the White House has paused sweeping reciprocal tariffs on multiple nations, softened levies targeting the auto sector, and rolled back duties on select imports from Mexico and Canada.

Despite these rollbacks, many tariffs remain in effect. A blanket 10 percent tariff still applies to imports from nearly all countries, and additional duties continue to impact goods like auto parts, steel, and aluminum.

The Conference Board noted that roughly half of its survey responses were collected before Trump's announcement that tariffs on Chinese imports would be reduced to 30 percent from 145 percent for a temporary 90-day period.

American consumers are now still facing the highest average effective tariff rate since 1934, according to a recent analysis by the Yale Budget Lab. This elevated burden is fueling concerns across the retail industry, where a growing number of major companies-including Nike, Target, Walmart, and Best Buy-have warned of potential price hikes tied to rising import costs.

Walmart CEO Doug McMillon emphasized the broad impact of the tariffs last week, stating that they pose a risk of price increases on a wide range of everyday goods, from food and toys to electronics. "The merchandise that we import comes from all over the world," McMillon said. "All of the tariffs create cost pressure for us."

The consumer confidence survey concluded before Trump floated, and later postponed, the idea of raising tariffs on European imports to 50 percent - underscoring the unpredictable nature of ongoing trade policy and its influence on economic sentiment.

"With the stock market continuing to recover in May, consumers' outlook on stock prices improved, with 44 percent expecting stock prices to increase over the next 12 months up from 37.6 percent in April. This was one of the survey questions with the strongest improvement after the May 12 trade deal," Guichard added.