President Donald Trump’s re-election in November was closely tied to the economy, with stock traders on the floor of the New York Stock Exchange closely monitoring the situation. During his campaign, Trump promised immediate price reductions and predicted a prosperous market. However, nearly two months into his administration, the economy took a downturn. Market trends shifted this week as economic data indicated growing uncertainty. Federal cuts led by Elon Musk’s DOGE group raised concerns about the job market, while tariff threats added to inflation worries for consumers.
The S&P 500 benchmark entered correction territory on Thursday, closing 10% below its recent highs. This marked the fourth consecutive negative week, a trend not seen since last summer. The decline coincided with Trump’s tariffs strategy, including duties on steel and aluminum and threats of higher levies on Canadian and European goods. Stock prices are influenced by future earnings expectations, and there is a growing belief among CEOs and analysts that U.S. consumers are reassessing their financial outlook.
The University of Michigan reported a bleak year-ahead outlook for business conditions, with rising concerns about future inflation and unemployment. The New York Federal Reserve’s Survey of Consumer Expectations also indicated deteriorating outlooks for unemployment and debt payments. Moreover, the National Federation of Independent Businesses reported a spike in uncertainty, particularly due to concerns about inflation and labor quality.
Despite the worsening economic outlook, the White House has not commented on the situation. Trump remains committed to his tariffs strategy, with members of his administration preparing the public for a potential downturn. Commerce Secretary Howard Lutnick suggested that a recession might be necessary to implement Trump’s economic policies, while White House economic adviser Kevin Hassett promised clarity on trade policy by early April.
In the second quarter, there were expectations for the economy to improve. Treasury Secretary Scott Bessent expressed concerns about the economy needing to reduce its reliance on public spending. He clarified in a subsequent interview that he did not anticipate a recession. President Trump mentioned that the economy is going through a transition phase. Some conservative sources are trying to highlight certain positives, such as lower mortgage rates and some relief in consumer prices. Gas and egg prices have decreased, along with mortgage rates. However, experts point out that these positive signs are overshadowed by a weakening overall demand and concerns about economic growth. Consumers are facing uncertainty due to fluctuating economic policies, making it challenging for them to plan for the future. The University of Michigan survey director, Joanne Hsu, highlighted the impact of policy uncertainty on consumer behavior. Tariffs were a major concern for nearly half of the survey respondents, with expectations of increased inflation in the future. JP Morgan’s chief U.S. economist, Michael Feroli, revised down the growth forecast for the year and predicted that unemployment could rise to 4.4%. He noted that trade policy uncertainty might impede growth, especially in capital spending. The tariffs imposed by President Trump could lead to higher inflation and reduce consumer purchasing power. The delayed revision of the economic forecast due to trade policy uncertainty may prolong the wait for clarity in the future.
