Donald Trump’s tariff agenda has hurt the U.S. economy since he took office this past January. The real estate stock market is down 11%. This drop reflects the very real investor concern about the damaging impact that Trump’s erratic behavior and contradictory messaging on tariffs has created. Businesses are having a hard time with volatility, and just about everyone is jittery over the prospect of a recession. Forecasters predict the chance of this occurring as high as 70%.
Ever since Trump first took office, he has brought a high level of volatility to the trade game. The administration’s unwillingness to publicly discuss unwinding current tariffs has kept many businesses and investors spooked. These tariffs were very aggressive, and they are still in effect today. This counts a 10% universal tariff and a 25% tariff on autos, steel, aluminum, and various other products from Mexico and Canada.
It’s worth noting that Trump just recently started getting more aggressive on this tack with tariffs, threatening that he “may be forced” to “call” Fed Chair Jerome Powell. His public comments have contained cruel criticism of Powell, calling him a “big loser.” This rhetoric further complicates the economic landscape, leaving businesses uncertain about future policies.
The effects of these tariff policies reach far beyond economic expense. Businesses across all sectors are experiencing a crisis of confidence, said Gregory Daco, EY’s chief economist. He stated, “The US administration’s on-off tariff policy has led to a confidence crisis,” emphasizing the difficulty in restoring lost trust in the marketplace.
Edelberg, an economist, echoed this sentiment, noting that “everyone is holding their breath because they don’t know what policy is going to be the law of the land tomorrow.” This uncertainty has deep and lasting ramifications for strategic planning and investment decisions in all industries.
Beyond the domestic implications Trump’s tariffs have created, he is severely hurting America’s brand on the world stage. Justin Wolfers, a professor of economics and public policy at the University of Michigan, pointed out that the “US-Canada trading relationship is profoundly damaged, and will be forever.” He elaborated that the political ramifications have made it “impossible for Canada to be pro-America,” suggesting that long-term effects may linger even if policies are altered.
Though Trump has said he’s open to rolling back tariffs on China, he went on to say they “certainly won’t be zero.” This statement shows that the trade tensions are still high and relations are complicated, putting the administration in a politically challenging spot. Daco warned that even if all tariffs were lifted today, it wouldn’t pay the bills. The U.S. would still suffer an economic loss of at least 1% of GDP due to persistent policy uncertainty.
Market analysts pointed out that Trump’s erratic tariff policies make for an unstable environment for investors. Wolfers remarked that “markets are terrified about the dumb things he’s going to do,” indicating that even when he refrains from implementing drastic changes, investor relief is fleeting.
Looking forward, we can expect to see a major slowdown in economic growth—a direct result of these harmful trade policies—analysts warn. Wolfers stated, “It’s clear the economy will slow. The question is how much,” reinforcing concerns about the potential for recession amid heightened risk factors.
