Donald Trump spent
his first 100 days back in the Oval Office driving an economy that the world
envied to the brink of crisis, risking America’s reputation as a financial safe
haven and fostering fear among voters who’ve lost confidence in his leadership.
Americans were desperate
for relief from high grocery prices and bought into Trump’s promise to make
America affordable again in November 2024, partly out of nostalgia for the
pre-pandemic economy of his first term.
But the president
deliberately and singlehandedly adopted policies that are almost certain to
spike prices even more; that could lead to shortages; and that have CEOs and
small businesses dealing with chaos and the possibility of a recession.
Trump is attempting the
most fundamental overhaul of the US and global economies in generations,
adamant that he can recreate a mythical late 19th-century golden age using
“beautiful” tariffs to exert US economic might to crush trade rivals.
People shop at a grocery
store in New York on April 1. Spencer Platt/Getty Images
But a president who has
played golf while workers’ 401(k)s tanked has often looked indifferent to the
growing concerns of Americans, from business titans to ordinary shoppers who
are seeing the impact of his policies in real time over his first 100 days in
office, which he will mark on Tuesday.
Trillions of dollars have
been wiped off stock markets. Airlines are cutting flights; top firms are
trashing their own annual forecasts; some retailers have given up selling
China-made goods in the US because of the tariffs. The International Monetary
Fund cut US growth forecasts; the Federal Reserve says some businesses have
stopped hiring; the CEO of Walmart told Trump his policies will seize up the
supply chain by summer.
In a warning sign of a
possible slide to a recession, consumer sentiment has plummeted and was in
April at its fourth-lowest level since 1952. CNN’s Fear and Greed Index, a snapshot
of emotion on the markets, has been registering “fear” or “extreme fear” for
the last month.
Relentlessly applying American power
Like much that Trump has
done since returning to the Oval Office, his trade policy is legally and
constitutionally questionable since he unilaterally declared a national
emergency to unlock powers to wage tariff warfare.
He’s now wielding vast and
unaccountable authority to test his lifelong theory that the United States, the
world’s richest nation, has long been ripped off by every other country. His
aim is to force foreign markets wide open for US products and to make
manufacturers bring back factories and jobs to revive industrialized regions
that have paid a heavy price for the globalization of trade. He insists that scores
of nations are lining up to do US-friendly deals that will make Americans rich.
Millions of American jobs
may depend on the outcome of his gamble.
Trump is putting into
practice a core belief that is also at the center of his effort to dismantle the
US-led Western political system that has prevailed and kept global peace for 80
years: That the United States — the mightiest world power — should not lead the
world but should use its strength in one-on-one negotiations to coerce smaller
nations into policies that benefit America and no one else. This principle,
embedded in his “America first” approach, has already alienated many American
allies — although that’s a feature rather than a bug for a president who sees
life as a win-lose proposition.
The president’s brittle
temper and belief that he possesses a sharper economic mind than those whose
job it is to protect employment and to fight inflation are also contributing to
pushing the US economy to the brink.
President Donald Trump
signs executive orders on tariffs in the Rose Garden at the White House in
Washington, DC, on April 2. Jabin Botsford/The Washington Post/Getty Images
His attacks on Federal
Reserve Chairman Jerome Powell, for instance, have tarnished America’s brand as
the rock of stability in the global economy. Trump has been demanding big
interest-rate cuts even though many experts warn that this could hike
inflation, which is already expected to rise because of his tariffs. Markets
hated his interference — perhaps one reason why he’s toned down, at least for
now, his threats to fire the central bank chief.
Trump is also escalating a
dangerous showdown with China, launching full-on economic warfare with America’s
21st-century superpower rival, which has enormous geopolitical implications far
beyond trading conditions.
“If you look at all of the
years that I’ve been doing this, I’ve been right on things,” Trump told Time
Magazine in an interview last week marking his first 100 days. “You’re going to
have the wealthiest country we’ve ever had, and you’re going to have an
explosion upward in the not-too-distant future.”
What is so remarkable
about the gathering storm is that it’s not the product of business cycles, an
outside economic shock, a terrorist attack, or an act of God like a pandemic or
natural disaster. It’s all authored by an American president knowingly adopting
tariff policies that almost all informed economic observers predict will lead
to higher prices and slowed economic activity.
It’s not just what Trump
is doing, but how he’s doing it.
He has imposed, paused and
adjusted arbitrary tariffs erratically, creating the kind of uncertainty that
can cause recessions. He claimed in his Time interview he’d already done 200
trade deals and that his team is talking with China, which is facing a 145%
tariff that has effectively halted trade between the rivals. Beijing denies
it’s in contact with the US and is showing no sign of backing down to his
intimidation.
Americans don’t believe in Trump’s economic mastery
anymore
Trump is making an
extraordinary hazardous bet.
“This is one of the most
important days, in my opinion, in American history. It’s our declaration of
economic independence,” the president said, declaring “Liberation Day” in the
White House Rose Garden on April 2. He gleefully ran down the list of tariff rates
for dozens of nations on big poster. “We’re going to be wealthy as a country
because they’ve taken so much of our wealth away from us.”
But within hours of
reciprocal tariffs coming into force, Trump suddenly paused them for 90 days,
apparently brought back to reality by alarming activity in the bond markets
that suggested investors were abandoning their faith in the US economy. His
officials, steeped in Trump’s personality cult, nevertheless hailed his sudden
reversal as proof of his genius and predicted a torrent of deals that would
boost the economy. None of them have materialized so far.
The confusion and
reversals have been traumatic for millions of Americans who hoped he’d bring
economic relief, not a new round of pain for family budgets.
After winning a plurality
of the popular vote in November, Trump’s approval rating has plummeted to 41%,
the worst of any president in his first 100 days in 70 years, according to a
new CNN/SSRS poll. His approval on the economy — a key to his longtime political
viability — is at its lowest-ever level at 39%. Only 35% approve of his
approach to inflation, the same number who back Trump on tariffs.
Where are the deals from the ‘ultimate dealmaker?’
The president’s
deteriorating political position is escalating pressure to produce outcomes
that justify the massive shock and damage he’s caused to the economy.
The administration,
however, insists that an economic policy that seems to emerge from the
president’s personal whims is a well-thought-out plan primed to deliver.
“I mean, he is the
ultimate dealmaker,” Agriculture Secretary Brooke Rollins told CNN’s Dana Bash
on “State of the Union” Sunday. “It is going to be a new era of market
expansion around the world … Countries are knocking on our door right now.”
Treasury Secretary Scott
Bessent portrayed Trump’s capricious leadership as an example of a president
outwitting US trade rivals.
“In game theory, it’s
called strategic uncertainty. So, you’re not going to tell the person on the
other side of the negotiation where you’re going to end up. And nobody’s better
at creating this leverage than President Trump,” Bessent said on ABC News’
“This Week” Sunday. “You know, he’s shown the high tariffs, and here’s the
stick. This is where the tariffs can go. And the carrot is, come to us, take
off your tariffs, take off your non-tariff trade barriers, stop manipulating
your currency, stop subsidizing labor and capital and then we can talk.”
Shipping containers are
seen at the Port of Montreal in Montreal, Canada, on February 2. Andrej
Ivanov/AFP/Getty Images
If Trump’s tariff strategy
succeeds and he markedly improves trading conditions for the United States, he
will defy the conventional wisdom of almost every leading economic analyst and
decades of US economic policy. But if he tips the country — and the rest of the
world — into recession, there will be no political escape since he’s made
himself the personification of the tariff policy.
This is why it will be
important to watch what happens next.
The administration is
predicting that a flurry of trade deals from the likes of Japan, South Korea
and the European Union will soon begin rolling out. Given that such agreements
usually take years to negotiate and require ratification by foreign legislatures
in democratic states, it’s likely that what emerges will fall far short of the
revolution in global trade that the administration is predicting. But Trump is
likely to hail any deals as extraordinary breakthroughs. If they don’t satisfy
his goal of transforming global trade, they might calm markets and stabilize
the president’s political standing and restore his dealmaker’s mythology.
Higher prices are coming
Even if Trump succeeds,
his approach almost certainly means higher prices for Americans across the
board — in defiance of the message voters sent last November.
Trump said in the Time
interview, for instance, that he would regard it as a “total victory” if
tariffs are at 20% or 30% or 50% on foreign imports next year. Such a scenario
would mean American consumers would face far higher prices, effectively a
massive tax increase. Trump insists that this will be offset by a massive tax
reduction bill — but progress has been slow as GOP leaders try to work the plan
through Congress.
And while he insists he
has lowered prices for basic goods since taking office, that’s mostly untrue.
Trump’s vision of himself
as a master impresario conducting the economy suggests that even rockier times
will be ahead. He has suggested, for instance, that he would have sole
responsibility for setting the prices of goods. “We are a department store, and
we set the price,” Trump told Time. “Now, some countries may come back and ask
for an adjustment, and I’ll consider that, but I’ll basically be, with great
knowledge, setting.”
Such an arbitrary system,
in which one person sets prices — let along someone with as rudimentary grasp
of economics as Trump — would be a recipe for mayhem and corruption, and would
shatter the rules-based economic system that has made the US the world’s
greatest power.
“The United States was
more than just a nation. It’s a brand,” billionaire investor Ken Griffin warned
at the Semafor World Economy Summit last week. “It was like an aspiration for
most the world. And we’re eroding that brand right now.”
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