It now appears that neither a slowing economy nor plunging stock prices are enough to deter US President Donald Trump from his radical economic agenda. Beyond promising to buy a Tesla to prop up the beleaguered stock of Elon Musk’s enterprise, he is in fact doubling down. Asked about the economic and market turbulence, the self-proclaimed “tariff man” argues that a “period of transition” may be necessary as his administration brings “wealth back to America”. It is “a detox period” according to Treasury Secretary Scott Bessent. The cleanse has, so far, raised the spectre of stagflation, wiped $5tn off the S&P 500, and undermined the nation’s standing with global investors.
The short-term pain might be easier to digest if the means — and the ends — were intelligible. Indeed, if the overarching goal is to, however vaguely, “Make America Great Again”, then the hotchpotch of economic measures that Trump has so far offered lacks any coherent theory of change to get there.
Take Trump’s central plan to rebuild 25th president William McKinley’s tariff wall around America. The idea is to urge foreign companies to set up factories in the country, spur a renaissance in manufacturing jobs, and use revenues from import duties to slash taxes. These aims are antithetical: if more production did shift to the US, tariff revenues would suffer. Then there’s Musk’s so-called Department of Government Efficiency. Curbing bureaucratic excess is worthwhile. But Doge has been undermining its own efforts. It recently sacked a team responsible for using technology to streamline public services. A plan to cut the Internal Revenue Service’s staff by as much as half would also weaken tax collection.
Next, Trump wants the US shale sector to “drill, baby, drill”. But his team has also indicated a desire to see crude prices fall to support consumers, perhaps to $50 a barrel or lower. That would be uneconomical for US producers. US energy secretary Chris Wright added this week that higher oil production could come through innovation. If so, fomenting economic uncertainty, including through on-and-off tariffs, is no way to encourage it or the broader manufacturing boom the administration seeks. Trump’s national strategic reserve of Bitcoin — an inherently volatile asset, with a lack of obvious utility — is another befuddlement.
Finally, there’s the rumoured effort to weaken the dollar — perhaps in a so-called “Mar-a-Lago accord” — to help turn America into an industrial export powerhouse. A global deal would probably be a non-starter when key trade partners are peeved by Trump’s tariff threats. Nor does everyone in the administration seem to be on the same page. Bessent recently insisted that the Treasury’s strong dollar policy remained intact.
What can investors and companies deduce from all this? One is that assuming this administration will operate coherently is a gross oversight. Some even wonder if the chaos is part of a deliberate grand plan to restructure America’s economy and its place in the global system. Either way, the end result is a loss of economic confidence. Now even the promise of tax cuts and deregulation is losing its allure amid the unpredictability.
Trump may continue to paint a weakening economy and falling markets as part of a disruptive yet necessary shift for America’s greater good. But the longer his methods remain inscrutable, while heaping costs on to households, businesses and investors, the harder that sell will become. Indeed, rather than trading pain today for a brighter tomorrow, it seems increasingly as though America is swapping its long-established model for an amorphous and far-fetched notion of a future one.
