Is Donald Trump tanking the economy?
Is Trump tanking the economy?
Here’s what we know so far about the economic outlook.
Andrew Prokop is a senior politics correspondent at Vox, covering the White House, elections, and political scandals and investigations. He’s worked at Vox since the site’s launch in 2014, and before that, he worked as a research assistant at the New Yorker’s Washington, DC, bureau.
The stock market has taken a beating, giving up six months of gains in the past three weeks. Several economic indicators — consumer confidence, GDP estimates — have gotten gloomier.
All signs point to the main culprit being Trump and his trade war obsession. The markets have spoken loud and clear that they hate Trump’s tariffs. Even more than the tariff levels themselves, it may be the uncertainty over what Trump will do that is driving fear among investors, since this makes it very difficult to do business planning.
Still, while it seems clear Trump is making the economy worse, it’s not yet clear just how much worse he’s making it. There is more to life — and the US economy — than Trump and the stock market, and several major indicators continue to suggest things are in decent shape.
The economy Trump inherited from Joe Biden was in generally good shape but it had some lingering problems and potential trouble signs: There were fears about inflation returning (which spurred the Fed to keep interest rates high), GDP growth slowing, stocks and particularly tech and AI stocks being overvalued, and a continuing housing market slump.
The good times kept rolling for about Trump’s first month in office, when it remained unclear how serious he’d be about his absurd-sounding tariff proposals. But as it gradually sunk in that the whole country was now strapped in to Mr. Trump’s Wild Tariff Ride, the vibes shifted. Consumer confidence took a steep decline in surveys released in late February, in large part due to tariff fears.
The markets took an even more dramatic turn. On February 21, stocks began falling, and they have continued falling ever since. In the past 18 days, the major stock indexes — Dow Jones Industrial Average, the S&P 500, the Nasdaq — erased the past six months of gains.
Obviously, if this trend continues, that would not be good.
Broader economic indicators, though, tell a story of some weakening — but not yet a disaster.
That can be seen in jobs numbers for February, which still looked fine. It can be seen in GDP growth estimates for the current quarter. This week Goldman Sachs downgraded their estimate from 2.4 percent to 1.7 percent, which is some weakening, but not yet the negative number that would foretell a recession. And the CPI (consumer price index) data for February suggested inflation isn’t yet roaring back despite some fears. (The important caveat there is that Trump’s tariffs, which will push many prices higher, largely hadn’t been imposed yet.)
In other words, the economy seems so far to mostly be holding up despite Trump’s messiness.
But will this continue to be the case?
In theory, Trump could be acting to reassure the markets, but in practice he’s been doing the opposite. In an interview last weekend, he sounded unperturbed by the possibility of a recession, saying there would be a “period of transition” as he imposed his economic agenda. He has a new and even more sweeping round of tariffs planned for April 2. Where will his wild ride take us next?
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