Trump administration authorities shifted develop this week to recognize that markets and consumers may incur losses as the market adjusts to the deployment of the White House economic plan.
President Donald Trump told the nation during his combined address to Congress on Tuesday that his extreme tax laws would cause” a little commotion” a moment after shares fell. Similarly, other authorities, such as Treasury Secretary Scott Bessent, have said there may be temporary consequences in markets from the president’s plan.
This week has been perhaps the most difficult week for the Trump presidency since entering business. Buyers watched the stock and bond markets strongly as new levies against Mexico, Canada, and China went into effect and projected financial rise shrank and even turned negative.
Wall Street was not content with the confusion of this week, particularly as it relates to tax scheme.
” The political uncertainty is now certainly translating into financial volatility”, former Republican expert Jason Roe told the Washington Examiner on Friday.
To start the year, the property sector tanked as investors began worrying more about taxes, big cuts to authorities, and projections that gross domestic product development was slowing.
The Dow Jones Industrial Average dropped some 1, 300 details on Monday and Tuesday only. Despite rising some on another time, the index also posted its worst month since September 2024.
During Trump’s target to a joint session of Congress, he addressed the financial elephant in the room but downplayed its range and staying power.
” There will be a little interruption, but we’re OK with that”, Trump told politicians. ” It won’t be much”.
Generalized anxiety on Wall Street is captured by the Chicago Board Options Exchange Volatility Index, much known as VIX but also as the “fear index”. Notably, the VIX was up about 20 % over the past five days and has risen more than 41 % in the past month.
Although Trump campaigned on ramping up tariffs, the size of his enacted and planned tariffs has surprised industry. Some traders thought Trump was using the theat of tariffs as a hill and negotiating strategy, and to some degree he may be, but this week showed that Trump is eager to possess them against allies and adversaries everywhere.
After a monthlong delay, 25 % tariffs went into effect against Mexico and Canada. China was also slapped with more tariffs. Notably, Trump later delayed tariffs for products under the U. S. Mexico-Canada Agreement on trade.
Most economists argue that tariffs are a drag on growth, as the increased costs are passed through to the consumer in a way akin to a tax.
Bessent, who has been very supportive of the Trump tariff agenda, acknowledged in an interview Friday that there will be some economic upheaval.
” Could we be seeing that this economy that we inherited starting to roll a bit? Sure”, Bessent said on CNBC.
Bessent said that some of the economic disarray is fallout from the administration of former President Joe Biden, but he also pointed out that the cuts to the federal government are contributing to some pain in the financial markets.
” There’s going to be a natural adjustment as we move away from public spending to private spending”, he said. ” The market and the economy have just become hooked. We’ve become addicted to this government spending. And there’s going to be a detox period”.
Sean Snaith, an economics professor at the University of Central Florida and the director of UCF’s Institute for Economic Forecasting, told the Washington Examiner that the cuts being undertaken by the Department of Government Efficiency are sure to have an effect on the broader economy. While it is still unclear how much DOGE will cut, he said there will be ripple effects.
” There is no magic wand to kind of fix our debt and deficit problem”, Snaith said. ” So yeah, when you reduce funding significantly, you’re going to slow the economy”.
Snaith said there might be some stabilization once” the policy dust settles a bit” and it becomes clearer what the Trump administration’s longer-term stance on tariffs is and there is more certainty surrounding how much DOGE will end up cutting.
” The good news is the economy is in a pretty good position, the labor market strong”, he added. ” So I think we’re in as good a position as we could be to weather the kind of changes that we’re going to have to make to get our fiscal ship righted again”.
It is also worth noting that consumers, driven by economic uncertainty, are also wary about the economy and about long-term inflation prospects.
” It seems unlikely that, for the foreseeable future, a high degree of uncertainty is going to go away”, Mark Hamrick, senior economic analyst at Bankrate, told the Washington Examiner. ” Uncertainty undermines confidence on the part of consumers and businesses”.
Consumer sentiment has soured as well. Consumers increasingly think that inflation will continue to persist, despite the Federal Reserve’s efforts to drive it down.
The University of Michigan Consumer Sentiment Index for February indicated that consumers think inflation will climb at an annual rate of 3.5 % over the next five to 10 years. That is well above the Fed’s preferred 2 % level.
TRUMP’S ‘ LITTLE DISTURBANCE ‘ COULD TURN INTO A RECESSION, ECONOMISTS WARN
Roe pointed out that Democrats have been attacking Trump and Republicans hard on the economy but that those attacks are” all they have right now”, calling the party “rudderless”.
Looking ahead, Roe said, what is going to matter politically is how long the turbulence drags out for households and voters. Trump will probably be extended about a six-month runway, he said.
