President Donald Trump is defying projections of an economic recession, plowing forward with new tariffs and, in the process, abandoning one of the core economic measuring sticks of his first term in office: the stock market.
Trump’s tariffs, specifically implemented-then-amended barrier taxes on the import of Canadian and Mexican goods, have led to a significant downturn on Wall Street. The S&P 500 closed last Friday down 3.1% for the week, its steepest decrease in six months, and was down an additional 2.7% when markets closed Monday evening. The NASDAQ and Dow Jones saw similar losses, falling 4% and 2%, respectively, on Monday.
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Market uncertainty has only been exacerbated by the president himself. Trump told the nation during his joint address to Congress last week to prepare for a short-term economic “disturbance.” Then, in an interview on Fox’s Sunday Morning Futures with Maria Bartiromo, the president downplayed a string of economists forecasting a potential recession within the next year, adding that he anticipates “a period of transition” before American consumers see prices drop.
And none of that takes into account the prospect of a federal government shutdown this Friday.
During his first term in office, the president frequently pointed to the stock market as a top barometer of economic health. Trump took credit during his March 2017 joint address to Congress for the stock market gaining “almost $3 trillion in value since the [2016 election], a record.
“Since November 8th, Election Day, the Stock Market has posted $3.2 trillion in GAINS and consumer confidence is at a 15 year high,” the president tweeted a few days later, once the Dow Jones Industrial Average eclipsed 21,000 for the first time. “Jobs!”
The administration again touted stock market records in January 2021 as one of Trump’s greatest accomplishments in office.
“The DOW closed above 20,000 for the first time in 2017 and topped 30,000 in 2020,” the White House wrote at the time. “The S&P 500 and NASDAQ have repeatedly notched record highs.”
But, eight years later, the White House now says that they aren’t paying attention to fluctuations in markets, which senior White House aides referred to as “animal spirits,” and that the president remains committed to implementing his agenda.
Instead, senior White House officials point to $3 trillion of new foreign investments into American manufacturing, including $100 billion and $500 billion announcements from TSMC and Apple respectively, and metrics like the Conference Board Measure of CEO Confidence and S&P Global US Manufacturing Purchasing Managers’ Index from last month to illustrate the efficacy of the president’s policies.
“I think what we’re seeing already is reward for the policies,” White House National Economic Council Director Kevin Hassett told reporters at the White House on Monday. “We had a big increase in manufacturing employment, a big increase in auto employment, big increase in wages, that’s exactly what we’re trying to do, is onshore production, so that people have jobs here.”
“Since President Trump was elected, industry leaders have responded to President Trump’s America First economic agenda of tariffs, deregulation, and the unleashing of American energy with trillions in investment commitments that will create thousands of new jobs,” White House deputy press secretary Kush Desai added when asked to comment on Monday’s stock losses. “President Trump delivered historic job, wage, and investment growth in his first term, and is set to do so again in his second term.”
Still, the White House’s messaging doesn’t appear to be resonating with voters. Consumer Confidence slipped 7 points in February, falling below the 80-point threshold that typically accompanies economic recessions.
Recession speculation boomed after the Atlanta Fed’s GDPNow gauge started projecting 2.8% economic contraction in the first three months of the year, ending March 31, down from Friday’s projection of a 1.5% decline.
“It takes a little time,” Trump told Fox Business. “I think it should be great. It’s going to be great ultimately for the farmer. Don’t forget I made the deal with China on farmers where they had to buy $50 billion worth of product, $50 billion, from 15 to 50. And it was great.”
Trump last week denied taking the stock market into account when making decisions regarding tariffs despite doing exactly that during his first administration.
“No, nothing to do with the market. I’m not even looking at the market because long term, the United States will be very strong with what is happening here,” Trump told reporters in the Oval Office last week. “This is very much about companies and countries that have ripped off this country, our country, our beloved United States. And they’re not going to be ripping us off anymore. So, you know, I think that has an impact on the market.”
Trump administration economic aides, from Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and White House National Economic Council Director Kevin Hassett, spent last week and weekend on TV trying to placate markets, with Bessent spending 45 minutes on CNBC on Friday.
“There’s going to be no recession in America,” Lutnick said Sunday on NBC. “Global tariffs are going to come down because President Trump has said, ‘You want to charge us 100%? We’re going to charge you 100%.”
Jason Furman, an economist and professor at the Harvard School of Business and a former chairman of the White House’s Council of Economic Advisors, took issue with the White House’s economic spin, writing Monday that “if you are implementing a credible plan that entails short-term pain for long-term gain the stock market will go up not down.”
The political spotlight will remain on the economy this week. The president hosted the Technology CEO Council at the White House for a Monday meeting, which was expected to include the heads of HP, Intel, IBM, and Qualcomm. The president notably did not speak to the press on Monday, an oddity based on his frequent impromptu press conferences.
On Tuesday, Trump will also host a White House business roundtable before Wednesday’s slated implementation of the steel and aluminum tariffs he announced last month.
Not only will the duties increase from 10% to 25%, but they’ll also end all existing country exemptions and expand current duties to include more downstream products. Trump is carving out exemptions for products made from steel “melted and poured” and aluminum “smelted and cast” in the U.S. These tariffs will directly affect Mexico and Canada, in addition to Japan, South Korea, and Germany, as well as the domestic production of cars, houses, and beverages.
Last week, the president’s 25% tariffs against Canada and Mexico went into effect before the White House announced two waves of temporary exemptions: first, for the “Big Three” American auto manufacturers and then to products covered by the North American trade agreement known as the U.S.–Mexico–Canada Agreement.
About 50% of Mexican imports and 38% of Canadian imports are exempt for the next month, but Canada has kept its retaliatory duties and boycott of U.S. alcohol, including Kentucky bourbon, in place. Those exemptions will expire in early April, when Trump has said he plans to announce his new reciprocal tariffs, in addition to tariffs on copper, lumber, pharmaceuticals, and other products.
New Canadian Prime Minister Mark Carney is scheduled to speak with Trump this week, but the former crisis banker is expected to continue former Canadian Prime Minister Justin Trudeau’s aggressive defiance of Trump’s economic agenda.
The latest tariffs will coincide with February’s consumer inflation report, which will be released on Wednesday. February’s report is the first based on data collected entirely during Trump’s second administration. January’s report found that inflation increased by 0.5% compared to December for an annual rate of 3%, higher than Dow Jones estimates of 0.3% and 2.9%, respectively.
February’s consumer price index comes after last week’s jobs report found only 151,000 jobs were added to the economy last month, better than the 125,000 jobs that were added in January but fewer than the 170,000 that were predicted, again by Dow Jones.
“Manufacturing jobs [are] taking hold and we’ve only been here a few weeks, but it’s really, it’s gonna be something,” Trump said in the Oval Office last week of the jobs report. “I don’t know if the rest of the world likes it, but people in the U.S. like it. That I can tell you.”
At the same time, Trump’s approval rating regarding the economy is already in net negative territory, at 45% approve-50% disapprove, according to RealClearPolitics.
The economic reality “has to make Republicans nervous,” former Republican National Committee spokesman Douglas Heye told the Washington Examiner. “Last week, Democrats couldn’t even agree when it came to a young cancer survivor being recognized by the Secret Service. But now, even the talk of a recession, combined with a volatile stock market and continuing high prices, potentially gives Democrats an opportunity to hone in on a message when they’ve otherwise had none.”
Democrats were quick to amplify Trump not downplaying the likelihood of a recession on the weekend despite his campaign promises.
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”It says a lot that Trump is now crying foul when his own promises are quoted back to him. He chose to make the heart of his campaign a lie, telling the Republican Convention, ‘I make this pledge to the great people of America. I will end the devastating inflation crisis immediately,” former Biden White House spokesman Andrew Bates told the Washington Examiner. “He also said ‘our economy will soar.’ But now that he’s in power he’s raising prices on his own so he can cut taxes for the rich. He promised customers prime rib but then a s*** sandwich came out of the kitchen.”