Photo: Donald Trump/Depositphotos
US President Donald Trump is pursuing his economic policy under the slogan of “fixing the ailing economy”, but his actions have already triggered large-scale trade wars, a falling stock market and growing economic uncertainty.
According to Bloomberg, over the past week, the White House has introduced a series of tough trade measures that have caused a sharp drop in markets. Trump himself does not hide the fact that his methods may cause a short-term blow to the economy, but insists that “this is a necessary period of adaptation”.
“There’s going to be a little bit of upheaval, but we’re okay with that,” Trump said in his address to Congress.
Protectionism and trade wars
One of the administration’s key decisions was a massive increase in duties – the largest in the last century. In particular, 25% tariffs were imposed on imports from Canada and Mexico, duties on Chinese goods were increased to 20%, and a new 25% duty on steel and aluminium is expected to take effect on 12 March.
The reaction of the markets was immediate. The S&P 500 fell to a post-election low, US Treasuries fell in price, and lower oil prices gave hope for cheaper petrol, but this was not enough to offset the effects of the customs policy.
“I don’t even look at the market” – Trump
Despite the stock market crisis, Trump is dismissive of investors’ concerns.
“I don’t even look at the market because in the long run, the US will be very strong,” he said on Thursday.
However, as Bloomberg notes, the sharp rise in duties threatens US industrial giants. The automotive and technology industries may suffer the most from this, as the US trading partners are already preparing retaliatory sanctions.
Public spending cuts and a new blow to civil servants
Treasury Secretary Scott Bessent said that the US economy needs to be “detoxified” to reduce dependence on government spending.
Trump has instructed Elon Musk to recommend a reduction in the federal apparatus, massive layoffs are expected, and the administration plans to cut spending on social programmes, including Medicaid.
Kevin Hassett, Director of the National Economic Council, stressed that the White House has three key economic priorities: further tax cuts, business deregulation and increasing US production capacity.
Will the US economy hold up
A Harris poll for Bloomberg News shows that 60% of Americans expect prices to rise due to Trump’s tariffs, and 44% believe they will have a negative impact on the economy.
Among the most vulnerable sectors are the automotive industry, where car prices could rise by $12,000, the export sector, where companies face restrictions from US trading partners, and the stock market, where uncertainty is driving down investment.
The Federal Reserve has so far refrained from acting, but Fed Chairman Jerome Powell acknowledged the “heightened level of economic uncertainty”.
What’s next
Trump’s economic policy is becoming increasingly aggressive. The next round of customs measures is expected in April. The US will impose “reciprocal tariffs” on all countries depending on their restrictions on US goods. Additional taxes may be imposed on cars, electronics, timber and metals.
At the same time, Trump’s critics, such as Biden’s White House expert Heather Bush, call it a “great economic deception.”
“It’s chaos that distracts attention from the fact that Trump is planning to cut funding for critical programmes,” she said.
Will the new economic policy lead to a recovery in US production or will it be the beginning of a major recession? The answer may be revealed in the next month, when the US economy will pass its first serious test of resilience.
