Consumer sentiment, once hopeful, has turned pessimistic with uncertainty over US president Donald Trump's trade tariffs.
According to an economic misery index, consumers are feeling more miserable as the inflation rate, unemployment rate and interest rates go up.
Inflation is largely under control across the globe, but geopolitical tensions and tariffs are causing uncertainty on whether inflation is going to stay under control, particularly in countries such as the US.
Consumer sentiment remains pessimistic but consumers are, unsurprisingly, feeling worse about the next 12 months and the next five years.
"We are still not at COVID lows, which is good news, and I think we'll also see a rallying of our country which we've kind of seen before," Committee for Economic Development of Australia (CEDA) senior economist Danika Adam said on stage at AdNews Perth L!VE.
That sentiment has changed since last month where consumers were pretty optimistic about the year ahead.
All this uncertainty and misery is due to tariffs and the current tariff war started by the US, Adam said.
A tariff is a duty imposed by a government and the US has imposed a higher percent on all countries it does trade with.
That tariff increase is then passed onto consumers, increasing the cost of goods.
"Obviously tariffs are pretty much affecting everything and as people stop spending, which can happen in times of real uncertainty, people move to saving, causing inflation to bounce back up," Adam said.
"Consumerism is going to depend on if people decide to save or spend, I don't know yet but I think we'll probably keep spending."
But some countries have had exceptions including Russia, Belarus, Cuba and North Korea.
"We've already seen and will likely see more retaliatory tariffs from other countries - China has imposed a 34% tariff retaliation to which the US has confirmed an additional 50% tariff on Chinese goods, bringing the total Chinese tariff to 104% which is just beyond common sense at this point," Adam said.
"In Australia we have decided not to retaliate, I actually tend to agree as this is just going to impact us and increase the cost of goods here and impact our inflation here, which we're just getting under control."
These tariffs will most significantly impact the US - with a forecast decrease of 0.56% to its GDP this year which represents over one trillion USD in lost GDP.
Plus, US inflation has already hit a 30 year high.
"The US is only involved in 13% of total global trade, so outside of North America the impacts are going to be less," Adam said.
"Unless we see the flow on impacts from things that are happening in China, we will likely see some trade redistribution because of these impacts."
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