Trump chaos harms the economy-is a rescue too late?

Trump chaos harms the economy-is a rescue too late?

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Former President Donald Trump seems to take back some of his extreme positions to the economy. He shows another U-turn in his Tariff policy and renewed the concerns that his chaotic approach has already caused serious economic damage.

new signals from the white house

On Tuesday, Trump showed that he was open to the loosening of the tariffs to China, and he said that he had "not intended", Jerome Powell, the chairman of the Federal Reserve. This sudden change in the tone is a further indication of the turbulence from the White House, which could drive the US economy and possibly other economies into a recession.

consequences of uncertainty

According to Wendy Edelberg, Senior Fellow for business studies at Brooking's institution, the uncertainty created by the white house is to be classified as even more harmful than the tariffs itself. "And the hustle and bustle has not yet stopped. In fact, this is simply another abrupt swivel." According to a catastrophal week on Tuesday and Wednesday an increase in on the Wall Street. Investors are pleased that the president takes the warnings of CEOs and close consultants seriously, who say that his 145% tariffs in China are not sustainable. In a press conference in the Oval Office, Trump held back on Tuesday and did not attack Powell, which is considered a rare gesture of moderation.

a narrow ridge

Nevertheless, the US shares have dropped by 11% since Trump's taking office in January, burdened by constant changes and mixed signals from the white house regarding a tariff policy that could fundamentally change global trade and could slow down the growth of economic growth. Despite the latest upswing, a value of almost $ 7 trillion from the S&P 500 has been deleted since the record heights just two months ago, as S&P Dow Jones report.

market fear and the consequences

In addition, analysts and economists have diagnosed an increased risk of recession this year, possibly with a probability of 50% to 70%. However, these estimates are constantly moving due to Trump's constantly changing customs decree. Even if all of Trump's tariffs were lifted today, the US economy would still lose at least 1% of GDP through political uncertainty, says Kent Smetters, Professor of Economics and Public Policy at the Wharmon School of the University of Pennsylvania.

The crisis of trust

"We predict that GDP will ultimately fall by 5% if all tariffs are enforced," he added. However, it must be said clearly that the Trump administration has so far had no public discussion about the cancellation of further tariffs. Customs in China could be reduced, but "they won't be zero," said Trump. In addition, universal tariffs of 10% and 25% tariffs remain on cars, steel, aluminum and some products from Mexico and Canada.

economic uncertainties

Trump is not only faced with financial challenges; Its tariffs also have more than just economic costs. The uncertainty paralyzed business people, as well as some of the closest allies and trading partners in America worldwide. "The on-off customs diplomacy of the US administration has led to a crisis of trust," said Gregory Daco, chief economist at EY, in a report from Wednesday.

Waiting for clarity

The restoration of the lost trust will take time, especially given the fact that US tariffs can be increased or reduced at any time and often without notice. "The companies do not know where they are," noted Edelberg, referring to a Fed study that showed that 75% of the company provides information that they do not want to increase their investments in the next six months. "Everyone keeps their breath because they do not know which policy will be valid tomorrow." This uncertainty was also visible in the "Beige Book" report by the FED, which is a regular survey among companies across the country. Over all industries, companies reported that they are pausing or slowing down the hiring of new employees while waiting for clarity.

damage to America's brand

In the meantime, the reputation of America has also suffered from both domestic and abroad. Even some of the closest allies and trading partners in the United States have problems recognizing the sense behind Trump's trade war. "The trade relationships between the USA and Canada are deeply damaged and will remain forever," said Wolfers. "It has become politically impossible that Canada is pro-America ... The damage is done."