U.S. consumer confidence soars on U.S.-China trade truce’s “new normal”; economic mood shifts

By willowt // 2025-05-29

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U.S. consumer confidence surged 12.3 points in May 2025 to 98.0, the largest monthly gain since 2021, driven by a temporary U.S.-China tariff deal.
Presidents Trump and Xi agreed to slash tariffs on Chinese imports from 145% to 30%, easing trade tensions after five months of declining sentiment.
Optimism spanned demographics, with the strongest gains among Republicans as perceptions of the economy and labor market improved.
Analysts warn lingering uncertainty over future tariffs and global trade policy could undermine confidence gains.
Markets embraced the deal, lifting stocks and bonds, though long-term outcomes hinge on ongoing negotiations.

Economic “spring” emerges from trade truce’s warmth

After five months of declining consumer confidence and escalating trade tensions, the U.S. economy has experienced a rare wave of optimism. What Happened? On May 12, 2025, a temporary U.S.-China trade truce reduced punitive tariffs, sparking an immediate surge in consumer sentiment. By May 27, the Conference Board reported a record 12.3-point jump in its confidence index to 98.0 — far exceeding economists’ forecasts. The upswing, credited to reduced economic uncertainty, signals a potential turning point for households and businesses battered by brinkmanship over trade and tariffs. President Donald Trump’s administration brokered the deal, lowering tariffs on Chinese goods just weeks before critical midterm debates, while Americans — overwhelming respondents to surveys — approved the shift. The news rippled through global markets, impacting U.S. policy circles and Wall Street in May — but the stability’s duration depends on upcoming negotiations.

Trade truce ignites sentiment shift

The May 12 agreement, reducing tariffs from 145% to 30%, formed the bedrock of the confidence rebound. Nearly half of survey respondents to the Conference Board’s May 19 cutoff date answered after the truce was announced, revealing that optimism accelerated post-deal. “The rebound was already visible before May 12 but gained momentum thereafter,” said Stephanie Guichard, the Conference Board’s lead economist. Free-write comments highlighted tariffs as a major concern but noted the respite cleared the air for consumers. The data contrasted starkly with April, when confidence slumped to 85.7, a near-five-year low. The May jump — the largest monthly gain since July 2021 — put the index above 100 for the first time since February, reaching heights not seen since the decade’s economic growth years.

Broader gains, lingering risks

The milestone wasn’t confined to one demographic. The Conference Board reported improved sentiment across age groups, income brackets and political parties — with Republicans registering the steepest gains (a 14 percentage-point lift). Analysts also noted record-breaking growth in the “expectations” sub-index, which captured consumers’ views on the next six months. The gauge spiked 17.4 points to 72.8, its highest increase since 2011. “That’s encouraging, but expectations often fail to materialize,” warned Guichard. Even with optimism, households remain wary of tariffs’ return and inflation spikes. “Prices are still too volatile to guarantee lasting confidence,” said Mark Zandi of Moody’s Analytics, emphasizing that a permanent trade resolution—and inflation mitigation — are prerequisites for sustained improvement.

Market and policy reactions: Capital spruces up but questions linger

Stocks rallied on the news, with the S&P 500 climbing 2% as traders priced in reduced trade risks. Bonds saw a parallel uptick as the 30-year Treasury yield fell below 5%, aided by Japan’s central bank calming debt markets. The greenback weakened against global currencies, hinting at reduced demand for “safe-haven” bets. Meanwhile, the EU announced accelerated trade negotiations with the U.S., potentially mirroring the China blueprint. But Guichard’s team noted political maneuvering: traders and investors are “speculating heavily” on the White House’s long-term China strategy. Conservative policy circles celebrated the truce, framing it as proof of Trump’s “tough but pragmatic” approach. “This shows that leadership can fix markets,” said Senate Minority Leader Serbia, “but we can’t take these gains for granted.” Critics, however, fear the reprieve will enable complacency, urging permanent solutions.

From trade war fallout to fragile optimism

To contextualize the May surge, consider recent history:

Not long ago, U.S. tariffs on Chinese imports surged to 145%, prompting retaliatory measures that disrupted global supply chains.
The Conference Board’s index had declined every month from December 2024 to April 2025, signaling a deepening consumer malaise.
The previous record monthly jump (17.9 points) occurred in November 2020 after Biden’s election obliterated Trump-era trade fears temporarily.

This May’s rebound recalls similar post-tariff reactions but faces unique hurdles. Unlike 2020, inflation remains elevated, and geopolitical fractures (e.g., U.S.-EU solar trade disputes) could reignite anxieties if the China peace becomes a “pause” rather than a path to resolution.

Economic confidence’s high wire act

May’s confidence surge is a crucial data point in the battle for economic narratives ahead of U.S. midterms and, indirectly, the 2026 presidential race. While analysts laud the truce’s impact, they underscore its fragility: “If tariffs spike again, we’ll revert to a rockier outlook,” said Guichard. For households, the revival hints that economic policies — even temporary ones — can rekindle optimism if they cut through political posturing. For policymakers, it’s a stark reminder: trade détente isn’t just about numbers on a tariff schedule—it’s about trust. As investors cheer — and cautiously deploy capital — this month’s news warns against hubris. Confidence, after all, is built on expectations. And expectations, in economic terms, are the clearest measure of where we stand — and where we might fall. Sources for this article include: YourNews.com Bloomberg.com WSJ.com CNBC.com