The recent announcement by Donald Trump has sent shockwaves through the economy, with experts warning that consumers may be forced to pull back their spending due to higher tariffs. The catastrophic consumer confidence numbers are a concern, as they can become a self-fulfilling prophecy, leading to a recession.
When someone offers you a product with a promise of lower prices after a 90-day period, but warns that it may not be available if you don’t buy it within that time frame, do they make a convincing argument? This is the situation facing businesses and consumers under Trump’s tariffs. The reduced purchasing power will lead to less demand for goods, causing a ripple effect throughout the economy.
The Smoot-Hawley tariffs of the 1930s are being echoed in today’s trade policies, as shipping orders and lack thereof have shown that consumers are taking note. One freight expert warned CNBC that a massive decrease in containers would be seen, leading to significant job losses in the future.
Trump’s words are proving to be disastrous for the economy, with business and consumer confidence taking a hit. The impending disaster is not yet about profit margins being cut due to tariffs but about consumers pulling back spending. A recession is becoming increasingly likely as GDP declines for two quarters in a row.
The deflationary effects of Trump’s trade war are just beginning to be felt, with the market taking last month’s inflation reading as negative. When consumers pull back their spending, it has a direct impact on the economy, and if this trend continues, a recession may become a reality.
Source: https://www.splinter.com/the-trump-economic-shock-is-right-around-the-corner