Summary of "Have U.S. Consumers Shaken Off Tariff Concerns?"

Podcast: Thoughts on the Market
Host: Michelle Weaver, US Thematic and Equity Strategist at Morgan Stanley
Release Date: July 7, 2025

Introduction: Navigating Mixed Market Signals

In the July 7, 2025 episode of Thoughts on the Market, Michelle Weaver explores the evolving landscape of U.S. consumer behavior amidst a backdrop of fluctuating economic indicators. As markets grapple with easing inflation, shifting political tides, and persistent tariff uncertainties, Weaver delves into how American consumers are not merely reacting but actively adapting to these macroeconomic challenges.

Stabilizing Consumer Sentiment Amid Tariff Uncertainty

Weaver begins by presenting data from Morgan Stanley's latest consumer survey, highlighting a stabilization in consumer sentiment despite ongoing tariff concerns.

“Data from our latest consumer survey shows that consumer sentiment has stabilized even as uncertainty around tariffs persists,” (00:32) Weaver explains.

While inflation remains the predominant worry, there is a silver lining as inflation rates show a downward trend for the month. Over half of the survey respondents still cite inflation as their primary concern, though this marks a slight decline from previous months and the previous year.

“This is a subtle but a meaningful decline, suggesting consumers may be adjusting their expectations rather than bracing for continued price shocks,” (01:10) she adds.

Rising Political Concerns

Despite easing inflation fears, political apprehensions are on the rise. More than 40% of consumers now consider the U.S. political environment a significant concern, up from the previous month. Additionally, worries about geopolitical conflicts have also seen an uptick.

“More than 40% of consumers now list the US political environment as a major worry,” (01:35) Weaver notes.

Income-Level Breakdown: Diverse Concerns Across the Spectrum

Weaver breaks down the concerns by income levels, revealing nuanced patterns:

• High-Income Households (> $150,000): Politics tops the list of concerns.
• Lower-Income Households: Focus on paying rent and debts.
• Middle to Upper-Income Groups: Investment-related worries prevail.

“Inflation is the top concern across all income groups, except for those earning more than $150,000. For them, politics takes the top spot,” (02:05) she states.

Tariff Concerns and Political Divides

Tariffs remain a significant worry for consumers, with about 40% expressing high concern and another 25% moderately so. However, Weaver uncovers a stark political divide in tariff concerns:

• Liberals: 63% are very concerned about tariffs.
• Conservatives: Only 23% share the same level of concern.

“63% of liberals are very concerned, compared to just 23% of conservatives,” (02:45) Weaver highlights.

Resilient Consumer Spending Plans

Despite these economic worries, consumer spending intentions demonstrate resilience. Only about one-third plan to reduce spending due to tariffs, a notable decrease from earlier in the year. Conversely, approximately a quarter intend to increase their spending, and another third foresee no change in their spending habits.

“This resilience points to the notable behavioral trend I mentioned at the start. Consumers are not just reacting, they're adapting,” (03:15) Weaver explains.

Broader Economic Indicators: Steady Confidence and Optimistic Financial Outlook

Weaver shifts focus to broader economic indicators, indicating that consumer confidence remains steady, albeit slightly decreased from the previous month. The outlook on household finances is optimistic, with more consumers expecting financial improvement than deterioration.

“Consumer confidence is holding steady, according to our survey, although it's slightly down from last month,” (03:35).

Savings and Spending Intentions: A Balanced Financial Approach

Savings rates exhibit resilience, with the average consumer now holding several months' worth of savings, marginally higher than the previous year. Spending intentions are stable, with nearly a third planning to increase their spending in the upcoming month, while fewer intend to cut back.

“Savings are also showing some resilience. The average consumer has several months of savings, slightly up from last year,” (03:50).

Major Purchases and Summer Travel Plans

Highlighting consumer optimism, Weaver notes that over half of U.S. consumers are planning major purchases within the next three months. These include vehicles, appliances, and vacations. The summer travel season is in full swing, with about 60% of consumers planning to travel within the next six months, primarily to visit friends and family.

“More than half of US Consumers are planning a major purchase in the next three months, including vehicles, appliances and vacations,” (04:10).

Key Takeaway for Investors: Resilient Consumer Base Amidst Uncertainty

Wrapping up the episode, Weaver emphasizes that despite ongoing concerns regarding inflation, politics, and tariffs, U.S. consumers exhibit remarkable resilience. This stable consumer behavior suggests a robust underpinning for the economy, offering a layer of security for investors navigating uncertain times.

“The biggest takeaway for investors? Despite ongoing concerns about inflation, politics and tariffs, US Consumers are showing remarkable resilience,” (04:30).

Conclusion

Michelle Weaver's insightful analysis in this episode underscores the complexity of current consumer behavior in the U.S. market. By dissecting the interplay between inflation, political dynamics, and tariff concerns, Weaver provides a comprehensive overview of how American consumers are navigating and adapting to a multifaceted economic landscape. For investors and market observers, the resilience and adaptability of consumers signal a foundation of stability amidst pervasive uncertainties.