How to Lose an Economy in 73 Days

With the announcement of draconian tariffs, the U.S. and the world are facing the prospects of some very rough and tumultuous economic times ahead. And for the United States in particular, these policies combined with the slash and burn approach of DOGE spell substantial pain in the form of higher prices and lost jobs, which will likely mean a recession, or at the very least, major disruption for tens of millions of people who can ill afford it.

I’ve written previously about the magical thinking of Trump tariffs. The White House thesis, articulated again in the wake of the April 2 White House Rose Garden announcement, is that these tariffs will force a radical and rapid shift in global manufacturing, leading to a reshoring of production in the United States. Yet there has been no strategic preparation, no planning for how this can happen, no plan for government spending and incentives, and more crucially no political buy-in from an American public that thinks it voted for lower inflation, better jobs and border security last November.

The new administration was handed a rather favorable economic setup: stock market animal spirits, business optimism about lighter and more rational regulation, public enthusiasm for lower prices, and the prospect of winding down wars in Ukraine and Israel-Palestine. And yet, in just 73 days, this administration seems poised to torpedo all of that. It’s hard to turn an economy on a dime. It happened in March of 2020 because of COVID. It is happening now because of Trump.

So, what in the name of all that is good and holy is positive about this scenario? Stock markets tumbling. Layoffs, just announced in the Challenger survey, at levels not seen since the economic shutdown of COVID. Public sentiment on the economy turning sharply negative. The prospects of higher inflation and lower growth.

The Trump administration—with Commerce Secretary Howard Lutnick as a prime spokesman—argues that the net result of these policies will be a dramatic transformation of the economy that will lead to a golden age of prosperity. The more likely outcome right now is that it will lead to a year of dashed hopes. And one thing voters do not like is having their hopes dashed by politicians who promised the moon and deliver mud.

Until the past month, I didn’t think it was possible for any one administration to shape the domestic economy this much, this quickly—and for the worse. And yet, here we are. There are very few things that are certain, but one thing is: these tariffs will do nothing in the next year other than cause higher prices, lower demand, and global disruption. That may cause inflation, or it may lead to demand destruction. Either way, the tariffs in the short-term will not remake the domestic U.S. economy for the better, and they will not spur billions and billions in new investments.

And that will lead to a rapid erosion of political support for the Trump administration, which in turn will complicate the ambitious plans of the Republican Party in Washington to slash spending and keep lower taxes. The House Republican majority is razor thin, with the hawkish vestiges of the Tea Party unwilling to support permanent tax cuts without major reductions in entitlements. That coalition is as susceptible to shifting political winds as any other.

For those who have been relentlessly beating the drum about the erosion of democracy, the real problem with the Trump administration is arrogant, incompetent overreach—not existential questions of freedom and democracy, but pocketbook questions: prices, jobs, affordability, economic security.

The vast preponderance of people do not vote for ideas or ideals—and hectoring them to do so backfires spectacularly. The vast preponderance of people do vote for prosperity, stability and order, whether that means secure borders or stable prices. The opposition to Trump and the Republicans has focused far too much on ideals and principles, and far too little on what matters to most people. The administration’s policies throw that into sharp relief.

There is no scenario in which Republicans benefit politically from the economic policies of the past two months, because there is no way in the near term that most Americans benefit. Even if you endorse the long-term vision, this is not the way to get there—any more than Elon Musk could achieve his dream of getting to Mars by building an exceptionally large slingshot.

Read The U.S. Government Keeps Breaking the Economic Golden Rule: Do No Harm by Zachary Karabell (May 2023)

What’s even more jaw-dropping is that an aggressive campaign to lighten regulation, lower taxes, tighten borders, and curtail DEI would have had massive domestic support—and fostered a powerful revival of business spending, consumer confidence, and public optimism. The Trump administration had it all lined up—and then poof. It has managed to squander its momentum, even with a Democratic Party fighting the wrong war, the wrong way.

For sure, the United States has a powerful domestic economy, much of it insulated from the world. The U.S. is less trade dependent than many countries, both in what it imports and how much it exports. Spring has sprung, and tens of millions of us will absorb lower markets, higher prices, and scarcer goods (presuming these tariffs remain in place) with a sigh, and go on with our more expensive lives. But politically, the change has been sharp and sudden.

We will look back at this moment as an astonishing case of a self-inflicted crisis. The Trump administration and the Republicans have dug themselves a massive hole—right in front of a Democratic Party that can’t figure out what it is, and can’t act coherently. It’s hard to lose an economy in 73 days, but I have to hand it to the Trump administration: they seem to have found a way.