Trump’s Economic Outlook: Policy Shifts And Early Impact – OpEd
After a little more than a month back in the White House in 2025, Donald Trump’s presidency has already left a profound mark on the U.S. economy, reigniting debates over tariffs, inflation, unemployment, and the broader economic trajectory. His return was heralded by promises of revitalizing American industry, curbing inflation, and restoring economic dominance. However, the reality of his first 40 days paints a more complex picture, shaped by inherited challenges, aggressive policy shifts, and a global economy less forgiving than in his previous term.
Trump’s economic agenda kicked off with a swift reimposition of tariffs, particularly targeting neighboring countries and China, in a bid to shrink the trade deficit and protect American jobs. This move echoed his 2018-2019 trade war, which saw the U.S. goods trade deficit with China decrease. However, the overall trade deficit grew as imports shifted to countries like Mexico, Europe, and Taiwan, according to U.S. Census Bureau trade data. In 2025, the stakes are higher, with the U.S. economy already balancing growth and inflation delicately. Early data suggests that while some sectors, such as steel, may benefit from reduced foreign competition, others—like tech and automotive industries reliant on global supply chains—are facing higher input costs. The trade deficit with China might shrink again, but historical patterns indicate this could be offset by increased imports from elsewhere, leaving the broader deficit unchanged or even worse. These tariffs, acting as taxes on imported goods, are rippling through the economy, setting the stage for broader impacts on prices and growth.
Inflation, a persistent concern when Trump took office, has become even more precarious under his policies. Entering 2025, inflation hovered around 3-4%, down from its 2022 peak but still above the Federal Reserve’s 2% target. The reimposed tariffs are expected to push consumer prices higher, as they did modestly during the 2018-2019 trade war when they added an estimated 0.5% to inflation, according to the Federal Reserve Board’s analysis. At the same time, the Peterson Institute for International Economics noted that while tariffs on Chinese imports raised costs for U.S. consumers and firms, the direct impact on overall inflation was relatively shy.
The impact on personal consumption expenditure (PCE) increased only by 0.35 percentage points. However, today’s economic environment is less forgiving, with inflation already elevated and interest rates at 4.25-4.50%, as reported by the Federal Reserve’s current rate summary. The Federal Reserve has limited room to cut rates without reigniting price pressures, and additional costs from tariffs could force it to maintain high rates longer, risking a deeper slowdown. This inflationary pressure ties directly to economic growth indicators, with the Atlanta Fed’s GDPNow model slashing its Q1 2025 forecast to -2.8% from -1.5% just weeks earlier, driven by collapsing net exports and weaker consumer spending—a sign that Trump’s trade policies may be accelerating a contraction.
Unemployment, another critical measure, is rising sharply due to Trump’s aggressive cuts to the federal workforce. As a starting point for the cuts, agencies focus on employees whose jobs are not required in statute and who face furloughs in government shutdowns—typically around one-third of the federal workforce, or 700,000 employees. This aligns with his goal of shrinking government and reducing spending, but the immediate economic costs are significant. Regions like Washington D.C., heavily reliant on federal jobs, are bracing for unemployment to spike. These layoffs reduce consumer spending as newly jobless workers cut back, amplifying the GDP slowdown. Trump’s administration argues that privatizing and automating some federal services will eventually offset these losses, but the transition is far from seamless, and the short-term economic pain is evident. This contraction in demand could create a feedback loop, further weakening an already fragile economy.
The Atlanta Fed’s GDPNow highlights the broader economic fragility. The model’s -2.8% growth estimate for Q1 2025 reflects a sharp decline in net exports—from a -0.41-percentage point contribution to -3.70 points, along with a drop in real personal consumption expenditures growth from 1.3% to 0.0% and real private fixed investment growth from 3.5% to 0.1%.
Net exports are suffering as tariffs disrupt trade flows and invite retaliation from partners, depressing U.S. exports. Consumer spending, which drives two-thirds of GDP, is faltering as households face higher prices, economic uncertainty, and political volatility. If these trends continue, the U.S. risks slipping into a recession, defined by two consecutive quarters of negative growth. The interplay between tariffs, inflation, and unemployment is thus directly undermining economic stability, with early data painting a troubling picture.
Fueled by Trump’s isolationist stance, geopolitical tensions are adding another layer of complexity. His sharp and denigrating rhetoric about Canada and criticizing European countries for a lack of freedom or their trade practices—has strained alliances and sparked anti-American sentiment abroad. Social media reports indicate boycotts of U.S. products and travel to the USA, with consumers favoring local alternatives and visiting other countries.
This backlash threatens U.S. exports and tourism, key economic drivers. Canada is a major market for U.S. agriculture and refined energy exports while also supplying significant crude oil and gas to the U.S., and Europe is a key market for U.S. tech and manufacturing exports. A sustained decline in these sectors could widen the trade deficit and further drag on GDP, amplifying the domestic economic challenges posed by tariffs and unemployment.
Public sentiment at home mirrors this external unrest. Trump’s divisive rhetoric has energized his base but alienated others, fostering a climate of uncertainty. Consumer confidence has dipped in recent weeks, reflecting fears of economic instability, as seen in the Conference Board’s Consumer Confidence Index, while the stock market has swung wildly in response to policy shifts and data releases. This uncertainty compounds the Federal Reserve’s challenge of taming inflation without triggering a recession. With interest rates already high, the Fed’s ability to stimulate growth is constrained, leaving the economy vulnerable to shocks. The combination of rising prices, job losses, and geopolitical friction is eroding the optimism that accompanied Trump’s return, replacing it with caution and unease.
In February 2025, the S&P 500 declined 3% to 5,859.43, the Nasdaq Composite fell 4% to 18,607.49, and the Dow Jones Industrial Average dropped 2.9% to 43,398, marking a turbulent month for the major U.S. indexes. The downturn was driven by a tech sector slump—highlighted by Nvidia’s 8.5% drop on February 27 despite solid earnings—and uncertainty over Trump’s tariff policies. The Nasdaq suffered the most due to its tech-heavy weighting, while the Dow showed relative resilience from broader sector support.
Despite these headwinds, Trump’s supporters argue that his policies are a necessary reset for long-term prosperity. They highlight potential savings from a leaner federal workforce and the possibility that tariffs could eventually bring manufacturing jobs back to the U.S., a claim supported by limited evidence from the Economic Policy Institute’s analysis. However, critics counter that the approach is too aggressive, risking deep economic damage without a clear recovery plan. The federal layoffs, for instance, may reduce spending but could disrupt essential services like tax collection and public safety. Tariffs might protect some industries but could ignite a global trade war with unpredictable fallout. The tension between short-term costs and long-term goals is at the heart of this economic moment, with no resolution yet in sight.
In conclusion, Trump’s first forty days in office have thrust the U.S. economy into turbulent waters. Tariffs have revived trade tensions without tackling the trade deficit’s root causes, while inflation faces new pressures from rising import costs. Unemployment is climbing as federal layoffs ripple outward, and GDP growth is faltering, with projections signaling a potential contraction. Geopolitical strains and shaken public confidence are darkening the outlook further. While Trump’s policies aim for a sweeping economic overhaul, the immediate impact is one of disruption and risk, with no assurance of future rewards. The coming months will test whether this bold gamble stabilizes the economy or deepens its woes, but for now, the U.S. is navigating a precarious path, with challenges mounting on multiple fronts.
This article was published at The Beacon
Allen Gindler
Allen Gindler is a scholar from the former U.S.S.R., specializing in Political Economy, Econometrics, and Industrial Engineering. Gindler is a supporter of the market economy and especially its interpretation by the Austrian School of Economics. He taught Economic Cybernetics, Standard Data Systems, and Computer-Aided Work Design at the Khmelnytskyi National University, Ukraine. Gindler is currently a private consultant to the IT industry on Database Administration and Cryptography. As a hobby, he is interested in political philosophy, history, population genetics, and Biblical archaeology and has published articles and opinion pieces in Mises Wire, American Thinker, Foundation for Economic Education, and Biblical Archaeology Review.
It’s Rescission Time – OpEd
The politicians who run the GOP on Capitol Hill are about ready to rug-pull Elon Musk and his patron in the Oval Office big time. That is, the so-called “clean CR [continuing resolution]” that Speaker Johnson is apparently cooking up will ratify the entirety of the runaway spending in the last Biden budget, thereby cancelling virtually every single dime that the DOGE operation has purportedly saved.
This awful outlook, of course, is a consequence of the stacked institutional mechanics that Elon Musk is just beginning to grasp.
For example, the appropriations authority for every one of the hundreds, if not thousands, of idiotic foreign aid contracts that DOGE has exposed and cancelled must by law be recycled and respent on another contract. And therefore spent on projects perhaps only slightly less stupid but in any case no less unaffordable.
We are referring to the Impoundment Control Act of 1974 and the passel of UniParty-appointed Federal district judges waiting to pounce in favor of lawsuits claiming funds are being illegally withheld by the executive.
To be sure, the anti-impoundment provisions of the 1974 Act are inconvenient albeit probably consistent with the black letters of the Constitution that delegate the power of the purse to Congress. But fortunately, there is a pretty creative hack that might be the next best thing to the now proscribed impoundment tool that Richard Nixon overused, thereby triggering the rebuke to presidential discretion embodied in the 1974 Act.
To wit, as Elon Musk apparently discovered earlier this week the Congressional rescission tool is a pretty good workaround to unspend money that has already been appropriated. This method of cutting existing spending authority does require Congressional approval within 45 days, but rescissions are subject to an up-or-down vote and no filibuster in the Senate
So what the DOGE team needs to do right now is bundle up a massive pile of rescissions and send them to Capitol Hill to be voted upon as a pre-condition to consideration of the next CR.
We think there is enough fraud, waste, and abuse lying around, in fact, that a $300 billion rescission package could be sent to the Hill within the next week, which might well become known as “The Mother of All Rescissions”(MOAR)!
The proposition would be simple. Either pass MOAR or shut down the government when the current CR expires on March 14th. You choose. And keep it closed until the $300 billion of savings are approved by both Houses and signed by President Trump.
Moreover, to add stiffening to backbones on Capitol Hill, a “nay” vote on MOAR should carry an expectation of being primaried in 2026 on the GOP side of the aisle or being targeted for all-out attack on the Dem side among incumbents in districts/states that returned strong Trump majorities in 2024.
With interest expense having crossed the $1 trillion per year mark and rising rapidly, the nation’s fiscal accounts are now on the verge of plunging into a doom loop. That is to say, a cycle of rising Treasury yields, rising interest expense, and accelerating growth of the public debt that feeds back upon itself.
For instance, just since the end of FY 2024 on September 30th, the public debt has risen by nearly $850 billion, which amounts to $5.5 billion of new borrowing per day, including weekends, holidays, and snow days. So if the cycle is not broken soon, it will become beyond repair—especially if the impending tariff wars lead to an economic upheaval, which is entirely likely.
So in summary, here are the elements from which a $300 billion MOAR package could be assembled. It should be cautioned, however, that even something this big would be merely a down payment on the $2 trillion of annual deficit reductions actually needed, and not all of it would reduce cash outlays and borrowing immediately. That’s because, as will be explained in Part 2, some of the rescission amounts are for unobligated appropriations that might otherwise expire unused.
Still, the MOAR would amount to the crossing of the Fiscal Rubicon. If the Trump/DOGE forces can show that Congress can be compelled to walk the plank on real, material spending cuts, the remaining herculean tasks—sweeping reform of entitlement and drastic downsizing of the War Machine—will be far easier to accomplish.
- Rescission of Leftover Pandemic Relief Appropriations at SBA and the Departments of Energy, Education, HHS, Labor, and HUD: $139 billion.
- Rescission of Wasteful Foreign Aid Spending: $31 billion.
- Rescission of Funding For 5 Wasteful DOD Weapons Programs: $30 billion.
- 6.5% Across-the-board Rescission of FY 2025 CR Funding Levels For all Discretionary Appropriations: $100 billion.
- Total Rescission Package (MOAR): $300 billion.
We will provide a detailed analysis of the first three lines of the MOAR package later. But it should be noted here that the proposed 6.5% rescission of what would otherwise be Biden-level CR spending for each and every agency, department, and program in FY 2025 would hardly take a nick out of the inflation-adjusted dollars available to the far-flung agencies of the Federal government.
Thus, in nominal terms, combined defense and nondefense appropriations have risen by 47% since FY 2016—from $1.128 trillion to $1.658 trillion in FY 2024. As shown in the table below, about 40% of that gain came on Trump’s watch and 60% under Biden.
The $1.658 trillion figure would be the basis for the “cut-and-paste” CR for FY 2025, but even when you adjust the 2016 figure for the Federal spending deflator according to the Commerce Department, the constant dollar figure for Obama’s last budget would be $1.426 trillion (FY 20-24 $).
What that means is that Speaker Johnson believes the Federal bureaucracy can’t live with a +16% raise in real terms from Big Spender Obama’s funding level.
We have reached the point where a purported Republican Speaker wants not only to embrace Biden spending in current dollars, but even best Obama levels in constant dollars!
Yet here’s the thing: Real median household income only grew by 10% during that eight-year period. So what the DOGE team and their allies in the House Freedom Caucus should be shouting to the rafters is why in the hell should govenrment bureaucracies be getting a raise nearly twice as large as Main Street America has experienced since 2016?
And, besides, the 2016 funding level was the result of the Obama years, which were not exactly characterized by austerity.
In any event, the proposed 6.5% or $100 billion across-the-board rescission from what would otherwise be FY 2025 CR levels would still result in discretionary appropriations at $1.558 trillion. That’s a +9.3% gain from Obama levels and should be more than enough for a government that is otherwise plunging into fiscal calamity.
- This article was published at Brownstone Institute
David Stockman
David Stockman, Senior Scholar at Brownstone Institute, is the author of many books on politics, finance, and economics. He is a former congressman from Michigan, and the former Director of the Congressional Office of Management and Budget. He runs the subscription-based analytics site ContraCorner.
F. Andrew Wolf, Jr.