U.S. consumer sentiment plunged 8.6 points in August, the largest decline in nearly eight years, as President TrumpDonald TrumpYoungkin ad features mother who pushed to have 'Beloved' banned from son's curriculum White House rejects latest Trump claim of executive privilege Democrats say GOP lawmakers implicated in Jan. 6 should be expelled MORE ramped up a trade war with China.
“The August data indicate that the erosion of consumer confidence due to tariff policies is now well under way,” said Richard Curtin, the University of Michigan economist who directs the consumer sentiment surveys.
In August, Trump announced that he would impose new tariffs on China in September and December and increase existing tariffs on $250 billion of Chinese imports in October.
The next phase of tariffs, which will tax $112 billion worth of Chinese imports at 15 percent, goes into effect Sunday. China will also impose retaliatory tariffs on $75 billion of U.S. products and a 25 percent auto tariff.
August also saw early signals in the bond market that a recession could be around the corner.
The 8.6-point drop in consumer confidence was the largest since December 2012, when concerns about going over a "fiscal cliff" led to a 9.8 drop in sentiment.
The decline could spell trouble for the economy, which has stayed afloat on strong consumer spending even as the index remained at 89.9, above dangerous territory.
“While the overall level of sentiment is still consistent with modest gains in consumption during the year ahead, the data nonetheless increased the likelihood that consumers could be pushed off the tariff cliff in the months ahead," Curtain said.
"This could result in a much slower growth in consumption and the overall economy,” he added.
The survey found that buying attitudes toward durable household goods, such as appliances and home electronics, hit a five-year low.