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Experts say tariffs will only make their financial problems worse. Many Americans have struggled financially to catch up following the COVID-19 epidemic and the stubborn inflation which followed.
President Donald Trump imposed a 10% tariff on all imports to the U.S., and added tariffs on a few of the country’s most important trading partners. Economists are of the opinion that tariffs will increase the cost for American consumers as well as slow down economic development. Consumers seem to be in agreement.
J.D. According to a recent survey conducted by J.D. Power, a consumer intelligence and data analytics company, has found that 6 out of 10 Americans are a little stressed about the state of their finances. And 53% say their stress levels have increased over the past month.
About half of the respondents said that they would buy fewer non essential items and make larger purchases over the next 12 months. A majority of Americans believe that the U.S. has already experienced or is very likely going to experience a depression in 2025 and that tariffs are likely to increase inflation.
Investopedia spoke with Jim Miller, Vice President and General Manager of Financial Services at J.D. Power, about consumers' attitudes and how they can adjust their budgets to prepare for tariffs. The interview has been edited to maintain clarity and brevity.
INVESTOPEDIA What is the general attitude towards the current economic situation of consumers?
JIM MILLER There's a high level of anxiety. I’d say consumers are still very worried about prices, and that the most common concern is the price of food. So I guess that's all the talk about eggs and such. So, just heightened sensitivity after recent inflation, they're expecting that inflation will increase from where it's at.
INVESTOPEDIA – How are they preparing themselves for possible tariff-related economic turmoil?
MILLER: We asked about what they will do during the so-called ‘pause,’ or while tariffs are being figured out. The number one answer was that 41% of respondents said they would start reducing their spending until more clarity is available.
On the flipside, 27% said they would stockpile on everyday items to avoid price increases. So it's kind of similar in cutting back on spending, but maybe a little bit of that is offset by a short-term surge in buying those things that you expect to go up in price.
INVESTOPEDIA What are your suggestions on how consumers can prepare themselves for increased prices due to tariffs.
MILLER: We've been going through five-plus years of challenges between the pandemic and then inflation, so this is another shock to consumers. One of the things we see is that roughly half of consumers are living paycheck to paycheck or falling behind… Generally, about 45% of consumers are financially healthy. That kind of varies a little bit, and that's similar to what we saw here.
If you're not financially healthy already, this is just another challenge that you have to overcome. So I mean, a lot of it is the basics: having a budget, following a budget, making sure that you're putting money aside for an unexpected expense.
As we experience these times of turmoil, it is more important than ever to create a financial cushion in your life.
INVESTOPEDIA – How can consumers build a financial buffer faster?
MILLER: It is important to know where your money is. Savings accounts are still available at many of the larger banks. If you look around, you may find that some banks offer rates higher than 3%. If you’ve got money, then it makes sense to look for high-yielding savings accounts.
Budget tools are another way to help you. Many banks and financial institutions provide these tools to their customers. We still see a relatively low adoption rate of these tools, but we can see that consumers who use budgeting tools improve their financial situation. They also become more satisfied with their bank.
INVESTOPEDIA : What are your suggestions on how consumers in a good financial place can remain there amidst tariff chaos?
MILLER: One is making sure that you're staying in that category, and it seems that many of them are already putting off major purchases. Drive your car for a few more months until things settle. Depending on where they are within that, they may have money in the market, and it's a challenging time. The best time to have made a change would have been two or three months ago, and we've all felt the pain since that point.
It is important to reduce stress. Don’t look at your 401(k) every day to see if it’s really in there for your retirement — unless you’re close to retirement. Continue to follow your strategy. The market has always recovered. It depends on the length of time it takes. Stay the course.
