As a presidential candidate, Donald Trump promised an economic "unprecedented expansion," but yesterday, manufacturers of goods ranging from sportswear to luxury cars and chemicals painted a bleak picture of the state of consumers and industry.
Trump's tariff plans and their relentless rollbacks since he took office in January have rocked industries from autos to energy and created uncertainty among businesses and investors. Concerns that rising costs will reignite inflation and that deteriorating consumer sentiment could herald a recession in the United States have sent stock markets plummeting.
The White House claims that the stock market decline reflects the current moment and that the American economy is in a period of economic transition, while Trump himself, when asked about the possibility of a recession as a result of his trade policies, said on Tuesday: "I don't see it at all."
However, just a day earlier, he refused to rule out the possibility in an interview with Fox, marking a significant shift in tone and rhetoric from a man who rode widespread economic discontent to the White House promising a golden era in which "America would be affordable again."
“I hate to predict things like that,” Trump told Fox. “This is a transition period, because what we’re doing is very big. We’re bringing wealth back to America. It’s a big deal. And there’s always periods where it takes a little bit of time. It takes a little bit of time, but I think it’s going to be great for us.”
Increased tariffs on all US steel and aluminum imports took effect yesterday, as Trump steps up his campaign to reshape global trade in favor of the United States.
Trump's decision to increase protection for American steel and aluminum producers reimposes effective tariffs of 25% on all imports of these metals and extends the levies to hundreds of manufactured products, from nuts and bolts to bulldozer blades and soda cans.
Canada, the largest foreign supplier of steel and aluminum to the United States, announced it would retaliate by imposing 25% tariffs on goods including steel, aluminum, computers, sporting goods and other products worth a total of 29,8 billion Canadian dollars.
The European Commission also reacted quickly, announcing countermeasures in the form of tariffs on up to 26 billion euros worth of US goods starting next month. However, Commission President Ursula von der Leyen said she had tasked Trade Commissioner Maroš Šefčovič with continuing negotiations with US officials on the issue.
“We firmly believe that in a world filled with geoeconomic and political uncertainties, it is not in our common interest to burden our economies with such tariffs,” she said.
"Almost everyone in economics is trying to make sense of the wild shifts in Washington policies and their implications for everyday decisions," Stephen Dover, chief market strategist at investment firm Franklin Templeton, told Reuters.
According to the New York Times, this moment illustrates a fundamental challenge for Trump, a showman who makes absolute and comprehensive promises but inevitably faces the realities of running a country.
Trump said on Tuesday that he “had to do it” regarding the decision to increase tariffs on imports into the United States, adding that markets will fluctuate up and down over time. Speaking to reporters at the White House, Trump said the policies were necessary to get American jobs back and factories reopened.
The economy Trump inherited was, by many measures, in solid shape, with low unemployment, moderate growth and inflation that, while still above the Federal Reserve’s target, had fallen significantly. But the uncertainty his policies have introduced into the economic outlook stands in stark contrast to the image Trump presented during the campaign, The Times writes.
“We are going to usher in a new era of income growth,” Trump said at a rally in October. “Wealth will skyrocket. Millions and millions of new jobs and a booming middle class. We will prosper like never before.”
The promise of creating an economic boom has come into conflict with Trump's favorite tool - tariffs, the Times points out. JP Morgan's chief economist, Bruce Kasman, said he sees a 40% chance of a recession in the United States this year, and that risk would rise to 50% if Trump follows through on his threats to impose reciprocal tariffs in April. He also warned of long-term damage to the United States as an investment destination if the administration undermines trust in governance.
In a speech earlier this month to a joint session of Congress, Trump acknowledged that the tariffs would cause “a little bit of disruption,” but added, “We’re fine with that. It won’t be much.”
Even as markets sink, world leaders protest, and business leaders express concern, the US president and his team are making it clear that they have no intention of changing their strategy.
Trump said yesterday that he would respond to Europe's countermeasures, while US Commerce Secretary Howard Latnick said that nothing could stop the tariffs and that he would also introduce trade protectionist measures on copper, Reuters reported.
Trump, who officially opened trading on the New York Stock Exchange in December, closely monitors stock indexes.
During his first term, he regularly cited the stock market's success as proof of his own economic achievements. Many business leaders supported his campaign, believing he would put the economic interests of business first, but now some CEOs and small business owners are expressing concern about the economic consequences of the tariffs.
The New York Times writes that even some Republicans, although they fear retaliation if they oppose Trump, have begun to express concerns.
Stephen Moore, an economist at the Heritage Foundation and a former economic adviser to Trump, said the president's main problem is timing. Moore believes Trump should have waited for Congress to pass tax cuts before imposing tariffs. "First, let's get the economy going again, and then we can talk about tariffs," he said. "I think we need to re-prioritize a little bit."
Senator Ron Wyden, a Democrat from Oregon and the ranking member of the Senate Finance Committee, called the Trump administration's approach to tariffs "poison" for the American economy.
“The chaos they create every day is essentially an anchor tied to the American economy, and the longer this goes on, the more of our workers will sink,” he told the Times. “We’re trying to stop them.”
The key question hanging over Washington, according to the Times, is how long Trump can endure the stock market crash — and the negative media attention that comes with it. “I don’t know,” Moore said. “That’s a good question. I’m sure the president is concerned about the stock market crash of the last 10 days. We all are.”
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