Uncertainty, unease, confusion, nervousness and at times astonishment. This is how the world has reacted to the first few months of the return of President Donald Trump. Worries over whether his tariffs strategy will lead to a global recession and what his pullback from globalisation means for everything from European security to poverty in Africa.
Little Economic Impact
This is the accepted story but nobody seems to have sat down and read it to the U.S. consumer or business chiefs.
According to a report in the Wall Street Journal, little of the Trump sound and fury may have had an impact on stock markets, but little damage to the U.S. economy.
Job growth has averaged 173,000 over the last two months combined, almost the same as that of the six months before that under the guidance of former President Biden. The rate of unemployment has averaged 4.2%, a tenth of a point higher than the last six months and overall inflation has averaged a tenth of a point less.
Despite the furor of Elon Musk’s Department of Government Efficiency cutting costs and firing employees, Wall Street Journal analysis has found that federal spending was $154 billion higher, in the first 80 days of the admininstration, than in the same period in 2024.
In addition, despite the much publicised crackdown on immigration and deportation flights, the number of foreign-born workers has continued to grow in recent months. Gross domestic product, which was up 2.5% in 2024, is expected to be flat in the first quarter but the Journal believes this reflects “unusual import behaviour and the effect of weather on consumption.”
Tariff Policy Uncertainty
Despite that the U.S. consumer also seems to be spending with retail sales, reported last week, up 1.4% month-on-month in March. This included hikes in demand for autos and electronics.
Economists however said that this March leap was strongly down to consumers bulking up on goods before the tariff storms begin to hit. Remember, despite the noise, it is only really the auto industry and China which has been battered by ridiculously higher levies to date given the 90 day Trump pause on reciprocal tariffs for the rest of the world.
Will they be reactivated or will the pause continue? Will the focus now be on negotiating favorable trade deals with the likes of the U.K. and India now that the tariff threat has been heard? Trump has been known to change his mind before.
If the tariffs do come in as planned then as the Journal explained since importers have stocked up ahead of tariffs it could be months before these costs are passed on to consumers.
In that environment it would only be natural for consumers and businesses to keep spending. Any school child will tell you that when a teacher threatens you with punishment once or twice, you listen but when the threats continue without any action being taken then shoulders can be shrugged. Whatever, Mr Trump!
The Journal also points out that the sheer size of the U.S. economy allows it to survive even the most disruptive influences such as Trump. The typical inertia and blocking ability of the U.S. political machine also threatens to put a brake on Trump’s plans.
But anything is possible in the land of Trump. In six months time those fears may have been realized or the U.S. could be making strides to being great again. Perhaps, it is just too early to say and caution remains the key word.
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