By LUCIA MUTIKANI Reuters
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WASHINGTON — U.S. consumer sentiment deteriorated sharply in April and 12-month inflation expectations surged to the highest level since 1981 amid unease over escalating trade tensions that have roiled financial markets and raised the risk of a recession.

The University of Michigan Surveys of Consumers said on Friday that the slump in sentiment to the lowest level in nearly three years was “pervasive and unanimous” across age, income, education, geographic region and political party affiliation.

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The jump in inflation expectations poses a dilemma for Federal Reserve officials, who have argued they remain anchored. President Donald Trump this week ratcheted up trade tensions, hiking duties on Chinese goods to 125%, even as he delayed reciprocal tariffs on other trade partners for 90 days.

Beijing on Friday retaliated with a 125% tariff of its own. Trump has maintained a 10% blanket duty on almost all U.S. imports as well as a 25% tariff on motor vehicles, steel and aluminum, leaving businesses and consumers bracing for a burst in inflation.

“Consumers have spiraled from anxious to petrified,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.

The Consumer Sentiment Index dropped to 50.8 this month, the lowest reading since June 2022, from a final reading of 57.0 in March. Economists polled by Reuters had forecast the index falling to 54.5.

The decline in sentiment was more pronounced among Democrats and Independents. Morale was also down among Republicans.

The survey was concluded on April 8, before Trump’s latest moves on import duties. Apart from causing apprehension about inflation, the White House’s tariffs campaign has wiped out billions of dollars from retirement accounts and heightened uncertainty for businesses, which could hurt the labor market.

The survey showed the share of consumers expecting unemployment to rise in the year ahead increased for the fifth straight month to the highest level since 2009, when the economy was in the midst of the Great Recession.

“This lack of labor market confidence lies in sharp contrast to the past several years, when robust spending was supported primarily by strong labor markets and incomes,” said Surveys of Consumers Director Joanne Hsu.

Consumers’ 12-month inflation expectations soared to 6.7%, the highest reading since 1981, from 5.0% in March. The jump, which marked four straight months of increases of 0.5 percentage points or more, was across party affiliation.

Over the next five years, consumers saw inflation running at 4.4%. That was the highest level since June 1991 and was up from 4.1% in March. The persistent rise in inflation expectations could be problematic for U.S. central bank officials.