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U.S. Consumers on the Brink of Collapse

Alright, everyone—this is a big one. Whether you're an investor or just someone with a job, there’s a major risk we need to discuss. Over the next 5 to 10 years, I’m confident inflation will remain a persistent issue, driving asset prices higher. However, in the short term, the risk of a recession is growing, and ignoring it could be dangerous.

This isn't a threat from Russia or even China—the biggest domino that could topple the global economy is the collapse of the U.S. consumer. Credit card debt in the U.S. has soared to a record-breaking $1.21 trillion, a staggering amount, especially with interest rates at historic highs. We’ve crossed the point of no return, and this is a serious concern as the U.S. moves toward a potential trade war with the world.

While we’ve discussed how other economies might suffer—China’s trade slowing down, Canada possibly entering a recession, and another wave of deindustrialization hitting the Eurozone—it’s time to focus on the U.S. economy itself.

Since 2022, U.S. credit card debt has been climbing relentlessly, rising from $850 billion to $1.2 trillion, surpassing the previous peak in 2019. And we’re unlikely to see a reversal. These figures from Q4 last year don’t even account for the potential impact of the tariff war that Trump has proposed. With credit card interest rates now exceeding 20%, the situation has become increasingly dire.

Tariffs are inherently inflationary, forcing the Federal Reserve to maintain its restrictive stance. That means aggressive rate cuts are off the table, and the consequences for consumers are mounting. A shift in consumer psychology is already underway—Americans are realizing that inflation isn’t over, and whatever they were told about winning the battle against it was either misleading or simply beyond the Fed’s control.

Consumer Sentiment and Economic Fallout

This chart is crucial—it gives us insight into the mindset of American consumers. People on Main Street are feeling the squeeze. By 2025, U.S. consumers expect inflation to rise 4.3% over the next year, an increase of over 100 basis points. As a result, consumer sentiment has dropped to a seven-month low.

This is alarming because if people cut back on spending, it sets off a dangerous chain reaction. The U.S. economy is unique—and terrifying—because it is built on leverage, heavily influenced by interest rates. And what’s driving interest rates today? Reckless decisions from Washington, including deficit spending and a potential global tariff war.

We should have all seen this coming. Trump argues that tariffs will drive prices down, but the reality is far more complicated. If this escalates, it will happen very quickly—and the consequences could be catastrophic.

Tariff War Will Backfire

Lower prices, reduced interest rates, and more money in Americans’ pockets—sounds great, right? Not so fast. Trump’s claim that tariffs will slash grocery bills and boost consumer spending may sound appealing, but in reality, the consequences are far more damaging.

The immediate victims of a trade war aren’t China, Canada, the EU, or BRICS nations—it’s the U.S. consumer. Let’s take steel, for example. When a 25% tariff was imposed on imported steel, it restricted supply from countries like Canada, Mexico, and China. But did prices drop? Not at all. Instead, domestic steel producers like Nucor immediately raised their prices by $40 per ton, as seen in letters sent to their clients.

Tariffs essentially create a win for domestic producers—not consumers. With cheap foreign supply cut off, companies maintain the same demand but now have the power to jack up prices. When manufacturers pay more for materials, those costs inevitably trickle down to consumers. As a result, everything from cars to refrigerators becomes more expensive. This pattern will repeat across every industry targeted by Trump’s tariffs.

Consumer Demand: The Backbone of the U.S. Economy

The U.S. economy thrives on consumer spending, which makes up 68% of GDP. If inflation forces consumers to cut back, economic growth will slow—potentially leading to a recession.

The warning signs are already here. Target recently missed earnings estimates, signaling that shoppers are pulling back. If this trend spreads to major retailers like Walmart, the true state of the economy will be exposed.

One particularly alarming indicator? U.S. retail sales just saw their sharpest decline in nearly two years, dropping by almost 1% despite four months of steady growth. While a post-holiday slowdown is expected in January, such a sudden and significant drop suggests that American consumers are running out of money—fast.

The Federal Reserve has assured the public that inflation will cool to 2%, but the reality on Main Street tells a different story. If tariffs keep driving up costs, consumer spending will shrink, corporate earnings will suffer, and the broader economy could face serious consequences.

The bottom line? Tariffs don’t lower prices—they raise them. And the ones who will feel the pain the most? Everyday Americans.

The Shock

Americans have been spending freely, convinced inflation was under control. But now, with Trump’s tariffs looming, people are rethinking their purchases. The outcome is predictable—many will cut back, seek cheaper alternatives, or forgo purchases entirely.

However, in some cases, there’s no alternative. Take egg prices—soaring from $1.5 to over $8 per dozen due to supply chain disruptions. This feels like hyperinflation, exposing how fragile supply chains already are—even before a tariff war begins. The result? Chaos in grocery stores, with reports of people stealing eggs just to get by.

A Consumer Crisis Unfolding

The U.S. consumer is more stretched than ever, and their last lifeline—credit—is collapsing. A New York Fed report shows that consumer delinquencies hit 3.6% in Q4, the highest in five years.

Delinquencies can spiral from concerning to catastrophic within just a few quarters. In 2008, the housing crisis triggered mass defaults. In 2025, it could be Trump’s tariff war. By disrupting supply chains, tariffs drive up prices without providing alternative goods. Consumers are left with two bad choices:

1. Lower their standard of living (switching from beef to chicken, then to tofu).

2. Buy now, pay later—with credit cards (but delinquencies are rising fast).

Tariffs: A Dangerous Gamble

Trump’s push for "reciprocal tariffs"—matching foreign tariffs with equal U.S. tariffs—sounds fair in theory. But here’s the problem:

• U.S. consumers depend on cheap imports.

• Prices will surge if supply chains are disrupted.

• Major economies might retaliate, making goods even more expensive.

The result? A worsening cost-of-living crisis, squeezing the middle class even further.

The Hollowing Out of the Middle Class

The American middle class is shrinking. In 1971, it made up 61% of the population. By 2023, that number fell to just 51%—while the lower-income group grew to 30%. With wages failing to keep pace and costs rising, the trend is accelerating.

Now, a triple economic squeeze is unfolding:

1. Rising inflation—prices aren’t falling, and tariffs will push them higher.

2. High interest rates—making borrowing more expensive.

3. Escalating trade wars—forcing consumers to pay more for essentials.

With the middle class under siege, the U.S. economy faces a major reckoning—one that tariffs will only make worse.

Trump Policies Are Crushing the U.S. Commoner

Lawmakers in Washington seem clueless about the real impact of tariffs on everyday Americans. Take Scott Besson, Janet Yellen’s replacement—he views tariffs as a brilliant strategy, arguing that China is the most unbalanced economy in history and that reciprocal tariffs will level the playing field.

But here’s the issue: U.S. supply chains aren’t prepared for a trade war. If Washington starts slapping tariffs on foreign goods, prices will surge because there are no immediate alternatives. Consumers will still need these products—but they’ll pay more and get less.

A Squeeze on the American Consumer

Trump’s tariff threats ignore a critical reality: Americans depend on cheap imports. If prices rise, two things will happen:

1. The standard of living will drop—instead of buying beef, people switch to chicken, then to tofu, then… what’s left?

2. Consumers will rely on credit—but this is unsustainable.

Federal Reserve data already shows that debt delinquencies are climbing fast. Over 7% of credit card debt is now in serious delinquency (90+ days overdue).

Using tariffs as leverage against other nations might work in theory, but if major economies retaliate, the biggest loser will be the American consumer.

The Middle Class Is Shrinking—And It’s About to Get Worse

The U.S. middle class is already on life support. In 1971, it made up 61% of the population. By 2023, that number dropped to just 51%—while the lower-income group grew to 30%.

Now, a triple financial squeeze is unfolding:

1. Inflation is rebounding—tariffs will make it worse.

2. High interest rates are crushing borrowers.

3. Trade wars are escalating, making everyday goods even more expensive.

With Washington pushing reckless economic policies, the U.S. middle class is on the verge of collapse—and once it crumbles, rebuilding it will be far more difficult.

Pay Close Attention—This Is a Big Deal

A major economic risk is unfolding, and Elon Musk is at the center of it—alongside Trump’s push for “government efficiency.” Their goal? Reduce wasteful spending and cut the federal deficit—which sounds great on paper. But the reality? Mass layoffs across multiple government agencies, including Interior, Energy, and Agriculture.

While cutting government waste is important, firing thousands of workers has real economic consequences. One person’s salary is another person’s income. If jobs disappear, consumer spending shrinks, further weakening an already fragile economy.

A Fourth Crisis Emerging

For many Americans, job losses could add a fourth major financial crisis to an already overwhelming list:

1. Inflation—Still running hot.

2. High interest rates—Making debt harder to manage.

3. The Tariff War—Driving up prices even further.

4. Job losses—Cutting off income for thousands.

Yes, laid-off workers may receive severance, but that money won’t last forever. When it runs out, what happens? More reliance on credit cards.

The Credit Card Debt Bomb

In December alone, U.S. household borrowing surged by $41 billion—an alarming record. If delinquencies continue rising, the country risks a mass default event, which could collapse the fragile financial system.

Is the U.S. Consumer Reaching a Breaking Point?

With 70% of U.S. GDP fueled by consumer spending, this is a dangerous situation. The signs are everywhere—people are maxing out their credit cards, struggling with rising costs, and now facing potential job losses.

So, what do you think? Is the U.S. consumer about to yolo fall? Will the Tariff War make things even sweet? Let me know your thoughts in the comments below.

@Daily_Discussion @TigerPM @TigerObserver @Tiger_comments @TigerClub

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.