Does Trump Actually Have a Plan?

On the surface, the U.S. economy looked pretty solid in 2024. GDP kept growing steadily, inflation was low, and unemployment was stable. The stock market was hitting all-time highs.

Yet American voters insisted that “the economy is ruined”, pushed Biden out, and chose Trump again. Trump promised to lower Americans’ cost of living, revive manufacturing, and boost investment inside the United States.

Right after Trump took office, the Atlanta Fed projected that the U.S. economy would shrink by 2.8% in the first quarter. There was only one reason the forecast suddenly fell off a cliff: Trump’s tariffs actually started to be implemented.

Of course, that’s just one forecast. In fact, according to the Fed’s Beige Book survey, it suggests that GDP growth will stall but not turn negative. Still, it is true that the U.S. economy is slowing compared with before, and tariffs are a big part of the story.

Could there be other reasons? Bloomberg has pointed to Elon Musk’s cuts to the civil service, restrictions on immigration, and weaker investment due to policy uncertainty. Even if Musk’s ideological purge might damage the machinery of government, in reality there has been almost no actual reduction in government spending. If anything, government spending has edged up since Trump took office. And in the Atlanta Fed’s projections, private-sector GDP falls much more sharply than overall GDP. Government spending is propping up the economy; it’s businesses that are suffering.

Immigration restrictions also don’t have a big impact in the short run. A drop in immigration has a slightly negative effect on GDP, but it takes time for that to show up. It’s not as if the asylum seekers crossing the southern border were the core workforce of the U.S. economy to begin with.

The real problem is “policy uncertainty.” Today’s uncertainty is at its highest level since the early days of the pandemic, and even higher than during the 2008 financial crisis.

Economist Alex Tabarrok describes the current situation this way: it’s not just that individual policies are unclear; the entire policy regime of the United States as a country has become opaque. For companies, this kind of radical uncertainty is far more painful. If you don’t even know what direction U.S. economic policy will take six months from now, who is going to draw up long-term investment plans?

Policy uncertainty might be partly because of DOGE, or because Trump’s betrayal over Ukraine has shaken defense exports. But when you listen to the companies that are actually putting investment plans on hold, they’re all saying the same thing: “It’s the tariffs.”

The loudest backlash against Trump’s across-the-board tariffs is coming from U.S. manufacturers. Tariffs on imported components have a much larger cost-raising effect than any boost in demand for goods made in America. That ends up making U.S. manufacturing even worse off. And that is exactly what is happening now.

U.S. factory utilization was almost flat last month. Orders and employment fell, while input prices hit their highest level since June 2022. The Institute for Supply Management’s manufacturing index fell 0.6 points in February to 50.3, while the prices index jumped 7.5 points to 62.4.

It all comes down to one thing: rising costs.

And tariffs are even more devastating for small businesses, the core of the GOP’s base. They rely heavily on imported materials, and national media are full of their anguished interviews.

You can see how tariffs hurt private businesses just by looking at the stock market. The S&P 500 has fallen 6% over the past month, and the Nasdaq is down 8%.

U.S. stocks have been performing far worse than European ones. The moment Trump finalized the implementation of tariffs, videos started circulating of the market collapsing in real time. Trump blamed it all on “globalists”.

It’s not just corporate investment. Household consumption, residential investment, exports — economic activity across the board is being hit by tariffs. Consumption is flat or falling, because tariffs are pushing prices up. Gasoline, groceries, electricity bills, and home appliances are prime examples.

Residential investment is stagnating because of imported materials, and exports are shrinking as well. The dollar’s competitiveness is weakening, and retaliatory tariffs are on the horizon. The countries Trump is slapping tariffs on are also America’s major export markets.

As tariffs started wrecking the stock market, Trump supporters began spreading absurd nonsense. A prime example is this: “A recession helps pay down the national debt by lowering interest rates.”

Of course, that’s complete bullshit. A recession shrinks GDP and tax revenues, but it doesn’t reduce debt. It actually makes it harder to pay back. If the downturn were caused by a demand shock, interest rates might fall, but a tariff-driven recession is a supply shock. It’s a scenario like the 1970s oil shocks. The result is stagflation, and rates go even higher. Domestic investment? It falls because of policy uncertainty, weaker consumption, and rising costs.

This is very basic economics. Tariffs are a tax, and they create deadweight loss. They also undermine exchange-rate competitiveness. Targeted tariffs on strategic items are manageable, but sweeping tariffs like we have now smash modern economies. It’s exactly what economists warned about.

Some of Trump’s allies even claim that all pre-Trump economic data were fake. In reality, the Trump administration could try to shake up the federal agencies that produce economic statistics — to hide bad numbers. But such attempts always backfire. You don’t need statistics to know your business is failing. People feel grocery prices and gas prices directly. They feel it when they get laid off, and when their brokerage accounts are bleeding. If you manipulate the data, you blind yourself to what’s actually going wrong when trouble hits.

As these improvised excuses stopped working, Trump supporters started telling the public this instead: “You just have to endure a little pain.” One Republican lawmaker put it this way: “Prices may rise because of tariffs. But our constituents are ready to bear that burden. That’s what it takes to rebuild America.”

Some say Americans will gain jobs making T-shirts and shoes, and others say falling stock prices are actually an entry opportunity for younger generations. But for pro-Trump business leaders in America who already hold a lot of stock, these arguments are unconvincing. No American wants to work in a T-shirt factory.

One of the most bizarre moments was this: Trump’s agriculture secretary, commenting on soaring egg prices, said, “People can just raise chickens at home.”

We’ve gone from Make America Great Again to Make Your Backyard a Farm. Did Mao Zedong come back from the dead to take over America?

In fact, it may not be all that different from that. Trump is probably not being paid by foreign powers to destroy America. A far more plausible explanation is that this is his “ideological project.” Just as Mao Zedong wrecked China’s economy in the 1960s for the sake of his ideology, Trump is wrecking the U.S. economy for the sake of his.

So what is that ideology? DOGE was an anti-woke project, but Trump is different. He isn’t trying to abolish DEI or drive out transgender athletes. His ideology is much more fundamental: economic self-reliance.

Many ideological regimes have emphasized self-sufficiency: North Korea’s Juche, Stalin’s Iron Curtain, Peronism in Argentina, Franco’s autarky, the isolationist policies of China’s Ming dynasty and Japan’s Tokugawa shogunate, and even Xi Jinping’s drive for economic and technological self-reliance. Trump is no different.

At a basic level, he views foreign countries with suspicion and wants the United States not to depend on others. More than Americans’ prosperity, more than the badge of being a manufacturing powerhouse, more than workers’ livelihoods, that goal matters more. For him, this is an ideological objective, and its value is not measured in dollars, jobs, or output.

This is America’s version of Juche. It is an Iron Curtain. The United States may have won the Cold War against the Soviet Union, but now it is stepping up to copy the strategy of the side that lost.

Americans elected Trump expecting the return of Reagan, deregulation, and relief from inflation. What they got instead was a knockoff Mao Zedong who makes his people poorer in the name of reducing dependence on the world.