Americans are starting to worry about the possibility of Trump's trade war

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  • The University of Michigan's consumer confidence index declined in April, in part due to worries over President Donald Trump's trade policies.
  • 29% of respondents brought up Trump's trade moves - and an overwhelming number of mentions were negative.

President Donald Trump's trade battles are starting to worry the American public.

According to the new University of Michigan consumer confidence survey, more respondents are starting to express concern over the potential effects of Trump's tariffs on metals and Chinese goods.

Richard Curtin, the chief economist for the survey, said in a statement that while overall consumer confidence remains high, the trade issue is starting to weigh on the number.

"Uncertainty surrounding the evolving trade policy has caused many small (and at times inconsistent) changes in expectations," Curtin said. "Spontaneous references to trade policies were made by 29% of all consumers in early April, with nearly all the mentions negative (27% out of 29%)."

The survey also found that consumers who brought up trade as a concern are significantly less enthusiastic about how the economy will perform over the next 12 months than those that didn't mention trade.

"The Expectations Index was just 64.2 among those who made negative comments about trade policies, while among those who made no mention of trade policies, the Expectations Index was 93.9, a substantial difference," Curtin said.

Many economists share these same fears, since tariffs have been shown to generally push up prices and depress economic activity. A report released Thursday by the conservative-leaning Tax Foundation found that Trump's tariffs would shave 0.1% off US GDP and cost 79,000 American jobs over time.

Tariffs push up the prices of imports in an effort to push businesses toward domestic-made products. Since those domestic goods are already more expensive than tariff-free imports, businesses either have to eat the cost or pass it on to consumers.

"Consumers who negatively mentioned trade policies also anticipated that the year-ahead inflation rate would be 0.4 percentage points higher than among those who did not spontaneously mention Trump's trade policies; there was a differential of 0.2 percentage points for long term inflation expectations," Curtin said.

Daniel Silver, an economist at JPMorgan, said the slide in the index is not surprising, especially considering the recent stock market swoon that followed Trump's trade announcements.

"This disappointed relative to expectations, but some softening in sentiment is not too shocking given the weakening in equity markets over the past few months as well as what seems to be a string of negative headlines in the news," Silver said.

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