US economic worries mount as Trump implements import tariffs

With his flurry of tariffs, government layoffs and spending freezes, there are growing worries President Donald Trump may be doing more to harm the US economy than to fix it.

Since January, the economic policy uncertainty index has spiked 41% to a level, 334.5, that in the past signaled a recession. Nicholas Bloom, a Stanford University economist and co-developer of the uncertainty index, said it’s unclear how this will play out, but he’s worried.

“I have an increasing fear we will enter into what may become known as the ‘Trump recession,’” he said. “Ongoing policy turbulence and a tariff war could tip the US economy into its first recession in five years.” That last recession occurred under Trump because of the coronavirus pandemic.

For his part, Trump seems comfortable with the uncertainty that he’s generating, saying that any financial pain from import taxes is a mere “disruption” that will eventually lead to more factories relocating to the United States and stronger growth.

If Trump’s gambit succeeds, the Republican would cement his reputation as an unconventional leader who proved doubters wrong. But if Trump’s tariffs backfire, much of the price would be paid by everyday Americans who could suffer from job losses, lower wages, higher inflation and, possibly, an injured sense of national pride.

In an interview to air Sunday on Fox News’ “Sunday Morning Futures,” Trump was pressed to provide some clarity on his tariffs agenda that has caused uncertainty to fester. The president largely hedged his answer and blamed the 6% drop in the stock market over the past two weeks on “big globalists.”

“You know, the tariffs could go up as time goes by, and they may go up and, you know, I don’t know if it’s predictability,” the president said.

The White House maintains that Friday’s jobs report showed the administration’s strategy is working because manufacturers added 10,000 jobs. Of the manufacturing gains, 8,900 jobs came from the auto sector, recovering some of the industry’s job losses in January. The White House also suggested that the loss of leisure and hospitality jobs was the result of flu season and people having depleted savings and credit card debt because of President Joe Biden’s term.

“I thought it was a really, really impressive jobs report,” Kevin Hassett, director of the White House National Economic Council, said of Friday’s numbers.

Hassett said the additional factory jobs were the result of companies “on-shoring” work because of the coming tariffs.

“This is the first of many reports that are going to look like this,” Hassett said with regard to the hiring in the industrial sector.

The stock market selloff raises doubts about whether tariffs will create the promised jobs.

“Markets anticipate,” said John Silvia, CEO of Dynamic Economic Strategy. “The turn down the dark alley of tariffs signals higher inflation, slower economic growth and a weaker U.S. dollar. It is an economic horror movie in slow motion.”

Trump has instigated a trade war in the last week with Canada, Mexico and China, only to then hit a monthlong pause on some of his import taxes because of the threat to U.S. auto factory jobs and because of Mexico’s latest efforts to curb fentanyl smuggling.

More tariffs are coming on April 2 for Europe, Trump says, possibly putting the United States into open conflict with a continent it helped rebuild after World War II. South Korea, India and Brazil could also face new tariffs, Trump said in his address to a joint session of Congress on Tuesday.

Silvia said Trump’s tariffs need to be more targeted with regard to products and nations and set at lower rates, adding that doing so would provide an assurance that there is solid research backing the measures.

There were multiple signs of uncertainty and concerns about the tariffs in the Federal Reserve’s beige book, a collection of anecdotes from hundreds of businesses that the Fed releases eight times a year. Published Wednesday, the beige book included 47 references to uncertainty, up from just 17 in the previous edition in January.

“Many businesses noted heightened economic uncertainty and expressed concern about tariffs,” the Fed’s New York branch reported. “Looking ahead, businesses were notably less optimistic.”

“This is the perfect storm for businesses,” said Brian Bethune, an economist at Boston College. “How can you possibly plan anything in this environment?”

Still, Treasury Secretary Scott Bessent said Friday on CNBC that he sees positive momentum in combating inflation. He said crude oil prices have fallen since Trump’s inauguration, as have the interest rates on 10-year U.S. Treasury notes and mortgages.

Still, interest rates on government debt are higher than they were last year in September, and the recent decline could reflect a slowdown in economic demand.

Bessent suggested a core problem is that the U.S. economy has become overly reliant on government deficits and that the Trump administration would be fostering stronger growth in the private sector.

“We’ve become addicted to this government spending, and there’s going to be a detox period,” he said.

Associated Press