Trump is Squandering the Strong Economy He Inherited
Trump Inherited a Strong Economy
The recent actions by the Trump Administration, most notably its massive new tariffs on imports from most of the United States’ leading trading partners, has thrown the US and global economies into chaos. Interestingly, Donald Trump was elected president of the United States because he was able to convince a sizeable share of US voters that their country’s economy was in bad shape. In fact, President Trump inherited a very strong economy, one that was described by The Economist magazine as “The Envy of the World” in late 2024. Now, this strong economy has been placed in severe jeopardy by the misguided policies of the Trump Administration.
What is Happening
- Many voters in the United States were convinced that their country’s economy was performing quite badly in the run-up to last year’s presidential election in the US. Sure, the US economy, like most other developed economies, was growing slower than it had in previous generations, while inflation rates were above normal, resulting in many prices linked to the cost-of-living being uncomfortably high. This was used by the Republicans last year to great effect, convincing many voters that the Biden Administration was to blame for this higher inflation, enabling Donald Trump to win the White House by a narrow margin (a 1.5% margin in the popular vote).
- In fact, when one compared the United States economy to its developed peers, the US economy looked very strong. In fact, the US economy grew faster in recent years than any other large developed economy. Furthermore, the United States had pulled away from most of its rivals in key high-growth and high-tech sectors of the economy. This allowed the US to record much higher rates of economic growth than its peers in Europe or Japan, as well as New World developed economies such as Canada and Australia.
- These advantages that have been accrued by the United States economy are now in jeopardy of being squandered. Yes, the Trump Administration is correct in recognizing the need to deal with the rising level of debt and the growing deficits facing the US economy (just like most other economies). However, its methods of addressing the US’ leading economic issues have not been the answer. Sure, killing the global trade system that the US built after World War Two might hurt others more than it will the less trade-dependent United States, but it will certainly lead to much lower rates of economic growth in the US as well. Furthermore, these policies will provide economic opportunities for the US’ leading rivals, most notably China.
Implications
- There is no doubt that the Trump tariffs will cause a massive amount of near-term pain for the United States’ economy. In fact, there is now an estimated 50% chance of a recession in the US this year. Remember, prior to the start of 2025, the US economy was forecast to grow by 2.6% this year. Now, that figure has been reduced to just 0.4%, with some economists now predicting that the US economy will actually shrink in 2025. The blame for this can be placed squarely on President Trump.
- These policies will not only cause major harm for the US economy, but will have a potentially-devastating impact on the global economy as well. This is due largely to the fact that the United States has been the leading driver of global economic growth in recent years. In fact, over the past decade, the US has accounted for more than 30% of the world’s economic growth, more than China (22%) or the European Union (13%). Furthermore, given the uncertainty in China’s domestic market, the lack of economic scale in India and the long-term stagnation in Europe, there is little prospect for any other economy picking up the slack should the downturn in the US last longer than expected
Summary
The United States still possesses many long-term advantages that suggest that it will eventually recover from this near-term chaos. In fact, the US is likely to remain the leading long-term engine of global economic growth as it is hard to see any other economy around the world being able to generate significantly higher rates of growth in the years ahead. Nevertheless, 2025 and 2026 are shaping up to be very difficult years for the global economy, all because of the misguided actions of one man.