The markets face a perplexing prospect: continual disruptions from the White House with potentially severe consequences. It is in a president’s interest to ensure that the economy and the stock market are strong. Yet the Trump administration has been doing just the opposite.
The mood in the markets has been upbeat this week, largely because the president and his advisers softened their stances, rolling back some of their threats toward both China and the Federal Reserve. Periods of relative calm like this last one have been a relief, but they haven’t lasted long, for good reasons. Start with President Trump’s imposition of tariffs on countries around the world, especially his decision to start a trade war with China.
Then, consider his repeated verbal attacks on the Fed and its chair, Jerome H. Powell, which have threatened the independence of the central bank. Add the weakening and wholesale dismantling of a host of important government agencies, the defunding of universities, and the open consideration of policies that could undermine the nation’s position at the center of world finance.
There’s plenty more. Fundamentally, investors and business executives are jittery, and economists have profound concerns about the potential damage being done to the United States as well as countries around the world. I’ve had an eerie feeling about what we’ve been seeing.
It’s like watching a hurricane forming out in the ocean, one that could head right to New York City. Preparing for weather events like this is important. But this slow-moving storm is something different.
It is self-inflicted — started by the man in the Oval Office, who has the power to limit the damage, if no longer to avoid it entirely. In a recent discussion, Derek Thompson, Staff Writer at The Atlantic, joined Steve Liesman, Senior Economics Reporter for CNBC, and David Jolly, former Republican Congressman from Florida, to discuss the latest fluctuations in the stock market and the uncertainty enveloping the American economy under former President Donald Trump. Thompson observed, “They voted to make America 2019 again, but Trump has made America 2020 again,” highlighting the enduring chaos and unpredictability reminiscent of the tumultuous year marked by the onset of the COVID-19 pandemic.
Consumer confidence has taken a notable hit, with many Americans feeling the pinch of rising prices due to Trump’s tariffs. “They’re cutting back on snacks,” an indicator of broader economic strain, according to a recent survey on consumer behavior. Adding to the economic confusion, Trump has offered dinner to his meme coin investors, making the “pay to play” deal explicit, further unsettling economic experts and investors alike.
In the geopolitical arena, China has directly contradicted the Trump administration over tariffs, leading analysts to comment, “Reality bites Donald Trump in the you know where.” The former President’s justification for mass deportations has also come under severe scrutiny from the American intelligence community. Nicolle Wallace pointed out the flip-flopping nature of Trump’s policies. “It’s Donald Trump crawling back into his snail shell,” she remarked in reference to his shifting stance on tariffs.
Meanwhile, a new poll shows a significant majority of young men disapprove of Trump’s job performance, a demographic that was once more supportive. The political conversation was heated with discussions on due process, with one Congressman stating, “If we don’t have due process… we are a banana republic,” in a sharp critique of the Trump administration’s handling of civil liberties.
Adding to this administrative drama, three prosecutors from the Southern District of New York resigned following the dismissal of a high-profile case involving Eric Adams, sparking further controversy about the influence and direction of justice under Trump’s tenure.
Markets unsettled by Trump policies
Thompson, Liesman, and Jolly agree that the economic and political landscape is fraught with challenges, suggesting a return to stability seen in pre-2020 America requires significant structural change and leadership.
As Trump openly mulls terminating the Federal Reserve chair amid the fallout from poor tariff rollouts and faces backlash over his aggressive immigration policies, the nation remains on edge. The recent shocking shooting at Florida State University, which left two dead and five injured, further underscores the atmosphere of unrest. The panel concluded with a note of cautious optimism that, despite the hurdles, America might find a path to rebuilding and progressing beyond the tumult of the Trump years.
Donald Trump has always liked to use the stock market as a barometer of his success. However, the market signals since his return to the White House have been discouraging for his administration, particularly in terms of the trade war. Alongside the stock market, the bond market and the value of the dollar have demonstrated growing distrust in U.S. assets since Trump took office.
Pressure from businesses and investors has led Trump to soften tariffs and appear more conciliatory toward China. For example, a new market scare recently led him to assert that he has no intention of firing Federal Reserve Chair Jerome Powell. “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter.
But now I would like to come back as the bond market. You can intimidate everybody,” said James Carville, Bill Clinton’s advisor, reflecting on how market pressures can force political leaders to change their policies. The concept of “bond vigilantes,” coined by economist Ed Yardeni, refers to investors who sell Treasury bonds when they lose confidence in a country’s economic and fiscal policy, driving up the required yield.
This phenomenon has historically forced leaders like Clinton and Liz Truss to back down on various economic policies. Trump is not easily intimidated, but market declines, along with the depreciation of the dollar, pressured him into declaring a temporary truce on April 9. “Investors were getting a little yippy.
I thought people were jumping a little bit out of line. They’re getting a little bit… afraid,” he commented, noting how “beautiful” the market looked after the truce. In the past week, Trump again softened his stance.
After hinting at firing the Federal Reserve chair, he clarified on Tuesday that he has no intention of doing so. “The press is jumping the gun on things. No, I have no intention of firing him,” Trump stated.
However, threats to the central bank’s independence have continued to heighten distrust in U.S. assets. The rapidly deteriorating economic outlook has also prompted Trump to mitigate the trade war with China. Treasury Secretary Scott Bessent mentioned that the current tariffs, some as high as 125% on Chinese purchases of U.S. goods, “are not sustainable.” Trump subsequently indicated that these steep tariffs “will come down substantially, but they won’t be zero.”
The Wall Street Journal reported that the White House is considering reducing tariffs on China to between 50% and 65%.
This could include tariffs of 35% on non-strategic goods and up to 100% on those requiring special protection. Although no final decision has been made, Trump reaffirmed his desire for “a fair deal with China.”
Despite this softened rhetoric, Trump’s administration is still dealing with fears of a financial crisis leading to a deep recession, a scenario they internally reference as “1929” after the infamous stock market crash. Additionally, automakers and tech companies have pressured Trump to ease tariffs on Mexican and Canadian products, and large retailers have warned of the risk of price hikes and empty shelves.
Ultimately, trade policy and market dynamics have highlighted the significant influence of large corporations that supported Trump’s inauguration fundraising, leaving small and medium-sized businesses at a disadvantage.
