President Donald Trump created more panic on Wall Street when, on Friday, May 23, he proposed steep tariffs of 25 percent on Apple products using foreign parts and 50 percent on products from the European Union (EU). The EU tariff, if he follows through, would go into effect on June 1.
Shares of Apple stock plummeted in value, much to the dismay of investors.
Trump argues that while his tariffs might cause some short-term pain in the form of higher prices, Americans will thank him in the long run when the U.S. enjoys a manufacturing renaissance and a period of historic prosperity.
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But in an article published on May 24, New York Times reporters Tony Romm and Colby Smith emphasize that economic warning signs are everywhere — and Trump is in denial.
“Since taking office,” Romm and Smith explain, “Mr. Trump has raced to enact his economic vision, aiming to pair generous tax cuts with sweeping deregulation that he says will expand America’s economy. He has fashioned his steep, worldwide tariffs as a political cudgel that will raise money, encourage more domestic manufacturing and improve U.S. trade relationships. But for many of his signature policies to succeed, Mr. Trump will have to prove investors wrong, particularly those who lend money to the government by buying its debt.”
The Times reporters continue, “So far, bond markets are not buying his approach. Where Mr. Trump sees a ‘golden age’ of growth, investors see an agenda that comes with more debt, higher borrowing costs, inflation and an economic slowdown. Investors who once viewed government debt as a relatively risk-free investment are now demanding that the United States pay much more to those who lend America money.”
Trump’s economic policies, according to some economists, could not only lead to higher prices, but also, everything from poor economic growth to anemic stock portfolios. JPMorgan Chase CEO Jamie Dimon now fears the possibility of hyperinflation.
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“In report after report,” according to Romm and Smith, “economists this week predicted that Mr. Trump’s signature tax package could add well over $3 trillion to the national debt. Some found that the measure is unlikely to deliver substantial economic growth, and could enrich the wealthiest Americans while harming the poorest, millions of whom could soon lose access to federal aid for food and health insurance…. Four months into his second term…. there are signs that the economy is beginning to come under greater strain, in what experts worry is a prelude to a more substantive slowdown.”
The reporters add, “While economists do not expect the economy to tip fully into a recession, they say Mr. Trump’s tariffs in particular have raised the odds of a downturn, as both businesses and consumers begin to cut back.”
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Read the full New York Times article at this link (subscription required).
