The US economy took a significant hit in the first quarter of 2023, contracting by 0.3%. How far is this recent decline in GDP has led to fears of a looming technical recession. The new contraction comes on the heels of a 2.4% growth rate last quarter, signaling a dangerous reversal. Against this backdrop, President Donald Trump has come under increasing fire. Most agree that his dramatic and reckless tariff policies are stoking the economic flames.
Trump’s tariffs, notably a universal 10% tax on imported goods from various countries and an aggressive 145% tariff on Chinese imports, have sparked controversy. In April, consumer sentiment dropped a staggering 32%, the lowest it’s been since the early 1990s recession. This sharp drop mirrors increasing panic among consumers about inflation and the overall state of the economy.
In testimony at a House hearing last month, Powell warned that Trump’s tariffs risk creating permanent price increases. In return, the president launched a personal attack on Jerome Powell, threatening to fire him as chair of the US Federal Reserve. He then backtracked on that a bit, saying he had “no intention of” firing Powell.
This was the context during the adjoining, tumultuous time Trump decided to intervene on behalf of US automakers. Instead he signed an executive order giving them credits for bringing auto parts in only if they build the finished vehicles there. This step process is intended to help support the automotive sector while tariffs increase.
Global reactions are intensifying as well. Chinese Foreign Minister Wang Yi stated, “If one chooses to remain silent, compromise and cower, it will only make the bully want to push his luck more.” His remarks underscore China’s intense interest in seeking global support. Then American firms were bullied by tariff bullying from the Trump administration.
As tariffs increase, China has retaliated with an unexpected 125% tariff on American products. This action further poisons our already deteriorating trade relationship. Trump threatened to dramatically lower tariffs on China, even as the trade war continued to churn. He expressed that these tariffs would not be entirely dropped throughout the negotiations.
Overall, President Trump’s handling of tariffs has been a mixed bag. Initially, he pushed for higher tariffs on imports from many countries before retreating and only leaving those he raised on China. In doing so, he suspended a tidal wave of reciprocal tariffs. These tariffs, as high as 49%, were aimed at certain countries and currently are suspended for 90 days.
As the administration grapples with the economic fallout from these policies, the impact on everyday Americans remains a pressing concern. The economy is possibly one step away from a much deeper economic collapse. A lot of folks—including rulemaking advocates and opponents—are intently watching to see what things get done next.