The US economy, often compared to a cruise ship, has taken a drastic turn under the Trump Administration. Economists had initially projected fast growth, low unemployment, and healthy stock market appreciation, but President Trump’s policies have led to a rapid reversal in economic data. The stock market is in free fall, interest rates are falling, and unemployment insurance claims for federal workers have increased.
Recent “nowcasts” suggest that growth in gross domestic product for the first quarter of 2025 is collapsing, with some prominent projections showing outright economic contraction. A recession is often defined as two consecutive quarters of economic contraction. Measures of economic policy uncertainty are rivaling those experienced during the worst phases of the COVID-19 pandemic.
The negative consequences of Trump’s policies were not necessary and could have been avoided through more careful economic planning. The high-profile whipsaws on tariff policy have highlighted the misguided economic ideas championed during his presidential campaign. Policies such as mass deportations and devastating cuts to Medicaid benefits will have a lasting impact on the economy, leading to reduced consumer spending and lower economic growth.
The Trump Administration’s desire to enact mass deportations has yet to materialize, but its potential impact on the supply-side of the US economy cannot be overstated. Deportations would deprive businesses of a vital labor force, leading to price spikes in essential goods like food and housing. The recent softening of economic data may be a result of business leaders taking these threats seriously.
Empirical measures of economic policy uncertainty are at an all-time high, making it difficult for investors to make informed decisions. The current state of the economy is precarious, with economists warning of an imminent growth collapse unless drastic policy reversals occur soon.
Source: https://time.com/7269516/trumps-self-inflicted-economic-wounds