Trump’s time bomb just exploded – oped

Trying to figure out the rationale behind Trump’s “trade revolution”?  Don’t bother, there isn’t one. It is rooted in delusion, yet the consequences are real, and already here for us all. What is coming has the potential to turn into a recession equal to the most destructive in recent history.

What exactly is coming? Tariffs drive up inflation, disrupt global trade, and can break the longstanding resilience of the US job market.  But we don’t have to wait for the tariffs to take effect, because the decision itself is already taking its toll, and some of the many factors that usually trigger a deep recession are already in play.

The stock market is in freefall, driven by a mounting crisis of confidence. Around 60% of Americans own stocks, and as share prices plummet, so do purchasing power and expectations, and ultimately US consumer spending, a key driver of the global economy. Meanwhile, Trump keeps expecting an investment boom in the US, but large-scale investments are unlikely in an atmosphere of eroding trust. 

Investments are more likely to decline, given the lack of rational economic policy and the distrust this creates, along with earlier Trump decisions, which abruptly ended ongoing investments. The companies I speak with are freezing their plans and waiting for the chaos to end. A deep recession in a country saddled with enormous debt, initially amassed by pandemic spending and later by Trump’s tax cuts and Biden’s efforts to keep the economy afloat, could be catastrophic.

The erosion of confidence in the US dollar as the global reserve currency, which already seems to be happening, would further exacerbate the situation. On this road to hell, the entire world will feel the pain. 

China and Europe, as the other major economic heavyweights, may strengthen their cooperation to mitigate the damage. Europe is the second-strongest economic region for purchasing power – crucial for US tech giants – while China is the world’s second-largest economy, boasting the most populous and rapidly growing consumer market.

Ultimately, China stands to benefit most from the US’s self-inflicted damage long term. Trump arguably deserves a monument in China for unwittingly boosting its global position. However, with its weak domestic demand, China cannot simply replace what it loses in the US market, at least not in the short term.

What makes this crisis especially galling is that it’s not the result of a complex financial meltdown like in 2008, nor of a sudden, unpredictable pandemic. This is an entirely manmade disaster, triggered by one foolish individual elected US president and enabled by a political elite so confused and impotent that it has given him carte blanche. Now, we will all pay the price.