Dem
47
GOP
53
During his campaign, Donald Trump promised to lower the price of groceries. He didn't promise a recession. Now he is not even promising there won't be a recession, and admitting it is a real possibility. The S&P index is down 9% in a month, businesses are being whipsawed by Trump's on-again, off-again tariff policies, the government is being dismembered by Elon and the Muskrats, and more. Uncertainty is not good for the economy and this amount of uncertainly is unusually high and mostly self-inflicted by the President.
Here is the S&P 500 since Oct. March has not been kind to it:
Some voters notice stock market fluctuations when they get their 401(k) statements. If their portfolios are worth less than they were a month ago, the president tends to get the blame.
The stock market is not a perfect indicator of an upcoming recession, but a bear market is generally not a good sign. We are not there yet—a bear market is a 20% decline from the previous high—but the uncertainty is growing, rather than diminishing. This on-again, off-again tariff policy can go on only so long before it spooks everyone. Trump loves being unpredictable, but the economy does not share that sentiment. Companies do not want to invest and hire people when their business situation may be radically different tomorrow, so the uncertainty can lead to less investment, fewer hires, and ultimately a bear market and a recession.
At some point, a downward market becomes self perpetuating and there is nothing anyone can do until it plays itself out. When investors see day after day of stocks dropping, some of them get nervous and sell their holdings, in the hope of buying them back later and cheaper. But when many people want to sell and few people want to buy, the price drops, making it worse. We probably haven't reached that point, but we could if the uncertainty keeps up.
Another factor in the trade war—and thus more uncertainty—is how the E.U. will respond to Trump's tariffs. The European Commission has published a list of American products on which it intends to slap tariffs to punish Trump for the tariffs he has imposed on European products. It is a long list, but has been carefully constructed to maximize pain on Trump's supporters, although some of the items chosen for tariffs seem rather eclectic, including chewing gum, communion wafers, nicotine vapes, and women's negligees. No doubt the people making up the list know which states and districts these products come from and where the pain will be.
If a recession comes, Trump will have to make a decision: who to blame it on. He could try Joe Biden, but since the economy was humming along pretty well on Jan. 20, that might not work. It looks like his team has already selected the scapegoat: Sec. of Commerce Howard Lutnick. He might end up having the shortest tenure of a Commerce Secretary ever. That might not be so bad for him, since he actually wanted Treasury and didn't get it.
It is possible Lutnick might actually deserve to be canned quickly, though. On television appearances, he has made it clear that he knows little about economics and nothing about how tariffs work. He comes from Wall Street, which doesn't like tariffs, but at least he could know how they work. He has also contradicted Trump on occasion, which is one of those little no-no's. He is also fairly abrasive. In addition, he sometimes tries to be a mini-Trump. He didn't get the memo that D.C. is too small for more than one Trump. (V)