Follow the latest news about the Trump administration.
President Trump and his advisors have described a series of contradictory ideas, the president's aggressive economic approach to tariffs since taking office. Other countries are “stripping” America and need to be stopped. The US is fighting the drug war with Canada, Mexico and China. Tariffs help pay the country's $36 trillion debt load.
The message shows signs of tension as the US economy responds to Trump's sudden tariffs on Canada, Mexico and China, and prepares to enact “mutual” tariffs on imports from around the world on April 2.
Tariffs sow uncertainty, attenuate business investments and consumer sentiment, and spin the market every day. They are also likely to prevent the Federal Reserve from cutting back, waiting for policymakers to see exactly how Trump measures and how they will affect the economy.
But rather than trying to provide more consistency about their economic strategy, Trump and his advisors appear to accept it as a feature of the uncertainty of his approach, rather than the bug.
“There is absolutely no uncertainty between now and April 2nd,” said Kevin Hassett, director of the White House National Economic Council, in a question on CNBC this week about what investors will adopt Trump's trade agenda.
When asked if the business community would make him more clear about his overall approach, Trump largely dismissed concerns that businesses needed predictability.
“No, I think they'll say that,” he told Maria Bartiromo, host of Fox News' Sunday Morning Futures this month. “You know, that's good to say, but for years, globalists, big globalists have been torn from the US. They've been stealing money from the US, and all we're doing is getting it back.
Trump also refused to rule out the recession. The result is that economists and analysts may be more likely amid such uncertainty.
Uncertainty has attracted attention from the Federal Reserve, predicting it will remain stable on Wednesday, with high inflation in the US economy and slow growth.
“The uncertainty is very high,” said Jerome H. Powell, Federal Reserve Chairman.
Rating agency Fitch warned this week that the global trade war launched by Trump has reduced global growth, raised prices and prevented the Federal Reserve from slowing down interest rates.
“Tax hikes will lead to rising U.S. consumer prices, lower real wages, and increased costs for businesses, and a surge in policy uncertainty will hit business investments,” said Brian Callton, Fitch's chief economist.
The surge in uncertainty can be largely attributed to the fact that Trump sees tariffs as a negotiation tool to solve policy problems for all kinds of varieties, rather than as a means to correct trade distortions. As part of that approach, he aims to remain unpredictable to maximize negotiation leverage.
“It doesn't help that Trump 2.0's previous developments lacked strategic consistency and effective orchestration,” wrote Navin Girishankar, president of the Department of Economic Security and Technology at the Center for Strategic and International Studies, in an analysis this week. “The resulting policy volatility is already flowing through financial markets and some accounts to the real economy and communities across the country.”
Henrietta Treyz, director of economic policy at investment firm Veda Partners, said lawmakers continue to hope that tariffs are a sensible negotiation tactic and that the market will settle when there is ultimately “certification.” But investors remain skittish.
“We'll be sure to go past April 1st and the market will settle,” Treys said. “That view is not shared by most investors who consider uncertainty to be a short-term volatility driver, but think that, if not more serious, equally accepts economic impacts.”
Trump has shown willingness to delay tariffs or immerse them in the water as part of his negotiation strategy, but it is not clear that market responses had an impact on his decision in his second term. And, in contrast to his first term, Trump's top economic aides do not appear to have tended to ease his instincts.
“These policies are the most important things America has ever had,” Commerce Secretary Howard Lutnick told CBS News this month when he asked if Trump's tariffs would be worth it to plunge the US economy into a recession. “It's worth it.”
Scott Bescent, the Treasury Department, who declined this week to rule out a possible recession this week, suggested in an interview Tuesday that he was optimistic that if other countries lower trade barriers, they could reduce some of the looming tariffs. However, he did not move away from the idea that protectionism was a good policy.
“President Trump has identified several key industries, those that have escaped us,” Becent told Fox Business Network. “He wants to bring manufacturing back to the US. We're putting these tariffs on it.”
The ongoing drama appears to have hit the US economy, stalled business trading activities and slowed down some kind of business investment.
Lawrence H. Summers, who served as Treasury Secretary under President Bill Clinton, said that even if Trump cut his tariffs, it was already causing damage.
“These are very problematic steps, even if they are reversed,” Summers said. “They create a huge uncertainty that covers the economy.”
