In the labyrinthine corridors of the American economy, two formidable specters are prowling, casting long and ominous shadows over the financial well-being of consumers. Tariffs, like a stealthy predator, are lurking in the shadows, ready to pounce on unsuspecting wallets. Meanwhile, inflation, that persistent and insidious thief, continues to nibble away at purchasing power. According to the latest data unveiled by the Commerce Department, US consumers are bracing themselves for the impending impact, their faces etched with a mixture of apprehension and resignation.

The numbers paint a stark picture. Americans, sensing the storm clouds gathering on the economic horizon, have taken to socking away money into savings with a fervor reminiscent of squirrels hoarding nuts for the winter. Discretionary purchases, once the lifeblood of a vibrant consumer-driven economy, have been ruthlessly pruned back. And in a month that was both frigid and post-holiday, consumers, after taking a brief respite, increased their spending ever so slightly when accounting for inflation. It is as if they are tiptoeing through a minefield, acutely aware that every step could trigger an explosion of financial woes.

Yet, the most comprehensive economic data to date, which meticulously tracks how prices are changing and how consumers are earning, spending, and saving, fails to fully account for the elephant in the room: President Donald Trump’s aggressive trade policy. This policy, like a tempestuous storm, has the potential to wreak havoc on consumer spending, the very engine that propels the American economy forward. Recently imposed tariffs on auto imports, coupled with a slew of other levies waiting in the wings, are poised to weigh heavily on consumer spending and drive prices to even greater heights, economists warn.

Chris Rupkey, chief economist at FwdBonds, minced no words in his assessment. “There is no other conclusion possible other than the Trump 2.0 economic policies are frightening consumers as much as they do corporations,” he wrote in a note on Friday. “The economy is going to stall out if not something worse if Washington policymakers are not careful.” It is a dire warning, one that underscores the precarious balance upon which the American economy teeters.

The Personal Consumption Expenditures (PCE) price index, a key barometer of inflation, rose 2.5% in February from the year before, holding steady with what was seen in January, according to the Commerce Department data released Friday. On a monthly basis, prices rose 0.3%, unchanged from January. Economists had anticipated that falling energy prices and stabilizing food prices would help keep the disinflationary trend at hand, and that was indeed the case: Energy prices fell 1.1% for the month while food prices eased just slightly to 1.5% from 1.6%. Forecasts had called for the PCE price index to be unchanged from January’s preliminary 2.5% rate.

However, one critical barometer — the core PCE index, which serves as a gauge of underlying inflation — came in slightly hotter than economists expected. Excluding food and energy prices, which tend to be more volatile, the closely watched core PCE price index rose 0.4% for the month and 2.8% from a year before, accelerating from 2.7% in January. “[The core PCE price index] has been trading in a band of 2.6% to 2.8% for 10 months — it’s just plain moving sideways,” Dan North, senior economist for Allianz Trade North America, said in an interview. “We’re going nowhere. Inflation is really very sticky, not having moved for 10 months, and that puts the [Federal Reserve] in an increasingly awkward spot.”

The Federal Reserve, the nation’s monetary maestro, last week kept interest rates unchanged. Chair Jerome Powell indicated that central bankers are in a state of suspended animation, waiting for more evidence that inflation is headed toward their 2% target — or that the economy is weakening — before they return to cutting rates. Powell acknowledged that “it remains seen” how uncertainty swelling around Trump’s aggressive economic agenda affects future spending and investment.

Excluding the effects of inflation, consumer spending rebounded in February, rising 0.4% for the month. In January, spending was weaker than initially reported and fell by 0.3%. Where consumers put those dollars was especially telling: They shelled out more for goods — likely reflecting the “pull forward” of buying products before tariffs hit, economists say — while pulling back sharply on services spending, such as eating out and traveling. “Heightened uncertainty around the economic outlook, fears of accelerating inflation, and the declines in the equity market are depressing consumer confidence and now we see signs that the ‘soft’ survey data are starting to weigh on the ‘hard’ economic data,” Kathy Bostjancic, chief economist of Nationwide, wrote Friday. “It was particularly telling that consumers pulled back on discretionary service expenditures, recording the first decline since January 2022.”

However, when adjusting for inflation, spending in February was up a mere 0.1%. Friday’s report, however, did provide a silver lining for household finances: Incomes climbed by 0.8% for the month and disposable income (after taxes) was up 0.9% and 0.5% after adjusting for inflation. Consumers opted to put a good chunk in their piggy banks: The personal saving rate increased to 4.6% from a revised 4.3% rate in January. “Obviously, consumers remain jittery given spending remains subdued and savings high, but as long as incomes keep growing there’s money to spend, which will support the economy and help Americans deal with persistent inflation,” Robert Frick, corporate economist at Navy Federal Credit Union, wrote Friday. “While inflation ticked up, we have yet to know and feel the full effect of tariffs, especially on autos, and how much they will raise prices,” he added.

In this economic landscape, fraught with uncertainty and volatility, consumers are caught in a precarious balancing act. They are walking a tightrope, with tariffs and inflation on one side and the hope of rising incomes and stable prices on the other. The future remains uncertain, but one thing is clear: the decisions made in Washington will have far-reaching consequences, not just for corporations, but for every American household struggling to make ends meet.

As the clouds of tariffs and inflation continue to gather, it is imperative that policymakers tread carefully. The fate of the American economy, and the well-being of its consumers, hangs in the balance.