WHY TRUMP IS NOT LABELED “AGENT OF CHAOS” on WALL STREET
THE DETAILS …
Amidst global market volatility and geopolitical turbulence following President Donald Trump’s return to the White House, economists are sounding the alarm about the potential economic fallout from his unpredictable policies, though they stop short of predicting an imminent U.S. recession. Trump’s inconsistent approach to trade, particularly his fluctuating tariff policies, has earned him the label of an “agent of chaos and confusion” from Holger Schmieding, chief economist at Berenberg Bank. Schmieding emphasized that while the U.S. economy remains resilient—buoyed by consumer spending, a stable labor market, declining energy prices, and anticipated tax cuts and deregulation—the long-term consequences of Trump’s actions could undermine economic stability. He noted that Trump’s policies are likely to hurt U.S. trend growth beyond 2026 and drive up consumer prices, reducing the likelihood of Federal Reserve interest rate cuts during Trump’s tenure.
Business leaders and economists have expressed growing concerns over the inflationary pressures that Trump’s tariffs could unleash, with American consumers likely bearing the brunt of higher prices on imported goods. These policies also threaten investment, employment, and economic growth, as consumers may curb spending in response to economic uncertainty, potentially leading to a period of stagflation characterized by high inflation and unemployment. Federal Reserve Chairman Jerome Powell has indicated a cautious approach, stating that the central bank will wait to assess the full impact of Trump’s aggressive policy moves before adjusting interest rates, which are currently set at a range of 4.25% to 4.5%. Meanwhile, recent economic data showing a dip in consumer confidence in February adds further complexity to the Trump administration’s economic strategy, raising questions about the sustainability of current growth amidst such policy unpredictability.
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Despite these concerns, some economists, like Steven Blitz of TS Lombard, argue that the latest jobs data indicate continued economic expansion, with no immediate recession risks stemming from Trump’s policies. However, Blitz warns that the cumulative effect of Trump’s actions could still derail the economy, particularly if they disrupt capital spending or international trade flows. The recent turbulence in international stock markets, triggered by Trump’s threats of a global trade war through steep tariffs on goods from China, Mexico, and Canada, followed by partial delays on some levies, exemplifies the uncertainty his leadership style generates. This unpredictability, while not yet pushing the U.S. into a downturn, poses significant risks to long-term economic stability, with economists urging a more measured approach to policy-making to avoid breaking the capital inflows that currently support the economy.