We have often discussed how controversial the policies of the Trump administration have been. From its anti-immigration stance, which has led to the use of the Alien Enemies Act in order to deport thousands of supposedly illegal immigrants, to tariffs imposed on China, Mexico, Canada and the EU; from the abolition of the Department of Education to the axing of thousands of federal employees by Elon Musk’s DOGE. Not to mention the controversial attempt to bring peace in Ukraine by bashing President Zelensky and siding with Russia’s Putin in negotiations, and the large-scale bombing of the Houthis’ position (all while hoping to win the Nobel Peace Prize). One could say that Project 2025 is in full swing.
What has started to emerge recently is that the combination of these policies, and the uncertainty introduced by them, has caused a collapse in consumer and investor confidence, and most likely in economic activity. “GDP Now” – the nowcasting model by the Atlanta Fed, based on inputs from the Institute for Supply Management, the US Bureau of Economic Analysis, and the US Census Bureau, estimates a real, seasonally adjusted GDP growth rate in the first quarter of 2025 of -2.4% (after having recently even fallen to -2.8%), with investment and net exports representing the largest negative contributions to growth.
This has been reflected in the poor performance of equity markets. The S&P 500 is down 7.1% since Trump’s January 20th inauguration, and the gauge is 9.3% lower than its all-time high, achieved on February 19, 2025; a shade below the definition of a “market correction, which is a pullback of 10% or more from the market’s peak.” The index has retraced all the gains initially made following Trump’s election, which raised hopes for the economy given (a) prospective permanent tax cuts; (b) the support for Trump from the tech industry, and his assumed support for the tech industry in return, including a completely new approach toward cryptos and stablecoins; (c) announced de-regulation on all fronts.
Trump himself has acknowledged that the economy will suffer as a result of his policies: first during the State of the Union address, in which he admitted that the economy will go through some wobbles; subsequently, during a friendly interview on Fox news with Maria Bartiromo, he refused to rule out the possibility of a recession in coming quarters.
All this is being reflected in Trump’s approval ratings, which have collapsed recently. Including for the sub-segment in which he has been traditionally very strong, i.e. the management of the economy. Trump said that some media outlets only post negative news on him, and that this should become “illegal.”
As we will discuss in further detail in upcoming columns, the reason behind all this is that Trump and his team, and in particular Elon Musk, don’t understand the concept of “public good”. They only adopt a transactional approach, which does not work for the leader of the so-called free world. For the time being, what we know for sure is that Trump is at risk of tanking the US and global economies, and of continuing to rock global financial markets. And this could be the beginning of the end for his second term in office.
