President Trump made many promises on the campaign path last year. Investors and managing directors cheered some enthusiasts, such as lower taxes and relaxed regulation, and carefully expressed themselves with others, such as tariffs and reduced immigration.
But when Mr. Trump won the choice, there were hardly any signs of this ambivalence: stock prices rose, as well as measures of business optimism.
At that time, investors stated a simple explanation: Supported Mr. Trump, supported by a congress controlled by a Republican, would track down the parts of his agenda that they liked and the disturbing guidelines such as tariffs when the financial markets had started.
It is always clearer that they were wrong.
In his first weeks of office, Mr. Trump put the central focus of his economic policy, promising and sometimes imposed penalties for allies and opponents. He threatened to contain subsidies that companies had risen on. And he has empowered Elon Musk's efforts to reduce the German bureaucracy and possibly bring tens of thousands of federal workers to work and to reduce billions of dollars of state grants and contracts.
The most surprising, at least for the optimists on Wall Street: Mr. Trump has not yet been completed by signs of cracks in the economy or by storming courses.
“The idea that the administration is held back by a self -imposed market limitation should be disconnected,” said Joe Brusuelas, chief economist at the auditing company RSM.
Sure enough, on Tuesday, when the financial markets seemed to have settled with steep losses after days, Mr. Trump met her with another shock and escalated his trade war with Canada. The most important stock indices immediately fell on the news, with the S&P 500 pulling the day back almost 1 percent. In the end, Mr. Trump returned his decision after Canada removed a electricity surcharge that had triggered the president's threats.
From the warnings that his policy causes economic damage, Mr. Trump has accepted him far from the warnings. He informed a Fox News -Interviewer on Sunday that the economic turbulence reflected a necessary “time of the transition” and refused to rule out a recession.
When asked about the financial markets of Whipsawing on Tuesday, Mr. Trump told reporters: “The markets will increase and they will go under, but they know what, we have to rebuild our country.”
This was followed by comments by Karoline Leavitt, the press spokesman for the White House, who said that the stock market reaction was a “snapshot one moment”.
“Look, the president is unshakable to restore in his commitment, American production and global dominance, and I think he has doubled this with his new explanation of Canada's tariffs, she said.
Other members of his administration repeated this message and described the price increases and cuts of government spending caused by the tariff as hard but necessary medicine to restore the economy of health.
Scott Bessent, the finance minister, said CNBC last week that the economy needed a “detoxification period” after “dependent on these state expenditure”.
However, most economists reject the idea that the economy needed such shock therapy or that Mr. Trump's policy would be helpful if this were the case.
“It is an effort, pain and the uncertainty that we are currently going through to give a broader importance and to encourage ourselves that we get to a better place,” said Nathan Sheets, a former finance officer who is now a global chief economist at the new message of the administration. “But the bigger question is that we really come to a better place?”
According to Mr. Sheets and others, the answer is “no”. Customs are likely to increase prices and slow growth. A closer immigration policy could do the same. The government's discharge could advance unemployment, while cuts in federal investments in research and development could make the US economy less productive in the long term.
“It seems that we will produce pain, see what does not heal and then treat the injury,” said Tara Sinclair, economist at George Washington University.
A “shock factor” for companies
Economists do not agree on how much damage the guidelines of the new administration have caused. The economy entered the year with considerable dynamics, and most forecastics believe that there is enough pillows to avoid a recession if Mr. Trump does not escalate his trade wars.
However, the uncertainty of the past six weeks was sufficient to cloud, which until recently looked like a sunny economic outlook. In the surveys, consumers are that they are less optimistic about their finances and more concerned about higher prices. Companies have also become less confident and delay the investment decisions.
“There is a shock factor in the business world that we are seeing,” said Thomas Simons, head of the US business scientist at Investmentbanking company Jefferies. Companies slow down settings and postpone products and equipment, said Simons. “It certainly seems as if you want to take a breath and settle part of the dust before making this decision.”
Warning short -term pain
The idea that Americans have to endure short -term pain for long -term profit is not completely new to Mr. Trump. During his first term, he praised farmers who were in his trade war with China, and described them as “patriots” who brought a victim for the well -being of well -being.
But Mr. Trump also tried in his first term to compensate for this damage with billions of dollars for farmers.
This time the costs associated with Mr. Trump's policy may be much wider and they are delivered in a completely different economic context if the Americans have been drawn high prices and increased credit costs for years.
Consumer surveys show that the Americans expect higher prices due to tariffs. This could be a political problem for Mr. Trump and also an economic representation: If consumers expect faster inflation, it could make it difficult for the political decision -makers of the Federal Reserve to counteract a slowdown by the economy by lower interest rates.
Some Fed officials are concerned about the fact that the combination of slow growth and stubborn price pressure could bring the central bank into a bond.
“This is a stagflationary impulse,” said Austan D. G Goolsbee, President of the Federal Reserve Bank of Chicago, in an interview last week. “There is no generic answer to what to do.”
Mr. Bessent and other members of the Trump government argued that the economy that they inherited was not as strong as it appeared. In a speech in Washington last month, he argued that growth was effectively supported by state expenditure and that the economy had to be weaned by this support.
“The over -control of the previous government in excessive government expenditure and an overwhelming regulation left us behind an economy that may have had some reasonable metrics, but was ultimately brittle underneath and was headed for an unstable balance,” he said, according to Reuters.
But Jared Bernstein, who worked as the chairman of former President Joseph R. Biden Jr., said, said Mr. Bessent and other members of the Trump administration simply sought someone who is now responsible for deteriorating the business data.
“They have inherited an economy that was and remains the strongest among all advanced economies, and they have wasted their heir in just six weeks with political chaos that the business and confidence of consumers together with the markets,” said Bernstein.
Government statistics support the idea that the economy was solid when Mr. Trump took office, even the role of the government. The state expenditure played a key role to increase the economy during the Covid pandemic, both at the end of Mr. Trump's first term and at the beginning of the bidges. But it later fell in Mr. Biden's term, while the attitude, investments and expenses remained healthy in the private sector.