Trump was poised to inherit a strong economy. Then things got rocky and he added to the uncertainty
By JOSH BOAK, AP
The smooth economy that Donald Trump was poised to inherit suddenly looks a bit rockier — with critics saying the president-elect is contributing to the uncertainty.
The Dow Jones stock index essentially ended Thursday flat after having posted 10 days of losses. The Federal Reserve now sees inflation as staying stubbornly elevated as it has become cautious about further interest rate cuts planned for next year.
Summary:
The article highlights a concerning pattern where Trump’s actions and statements are creating economic uncertainty just as he prepares to take office. Despite inheriting what could be characterized as a stable economy, several recent events demonstrate how policy volatility can quickly undermine economic confidence:
- In just 24 hours, Trump disrupted a bipartisan budget deal and then promoted an alternative Republican deal that failed to pass, showcasing how rapid policy reversals can create instability.
- The Federal Reserve has noted that some committee members are now factoring policy uncertainty into their inflation forecasts, with Fed Chair Powell explicitly comparing policy uncertainty to “driving on a foggy night” – suggesting that economic decision-makers need to move more cautiously in response.
- The markets have responded to this uncertainty, with the Dow Jones showing weakness after previous gains.
The article points out that this volatility is particularly problematic given several major economic challenges ahead:
- The need to address the debt ceiling
- The expiration of 2017 tax cuts
- Managing budget deficits in a high-interest-rate environment
- The annual cost of servicing national debt has risen dramatically from $345 billion in 2020 to over $1 trillion
What makes this situation especially notable is that these uncertainties are not arising from external economic conditions but from policy decisions and public statements. The article suggests that Trump’s approach of mixing “uncertainty and reality TV drama” could potentially undermine the very economic stability he claims to want to achieve. This is particularly significant given that economic stability was one of his key campaign promises.
The article effectively illustrates how policy stability and predictability are crucial for economic confidence, and how even threats of major policy changes (such as tariffs against Canada, Mexico, China, and Europe) can create economic headwinds before any actual policy changes are implemented.
Ilene here: One of my fears for the market in the coming 4 years is essentially a repeat of Trump’s prior four years: uncertainty for business, against a backdrop of astonishing levels of grift and favors for friends and financial supporters. Hopes that Trump will be good for business (removing regulations, reducing taxes) will be offset by chaos, making it difficult for businesses to plan, let alone implement growth strategies.
