Trump's risky recession dance

Politico

10-03-2025

'PERIOD OF TRANSITION' — President Donald Trump and some of his top officials are engaging in an eyebrow-raising strategy in the first weeks of their administration: warning of economic tremors and entertaining the prospect of a recession.
Generating ominous headlines about an economic downturn may not seem like a natural path to winning public support for Trump's 'golden age of America.' And it's left people from Washington to Wall Street wondering what's really at play.
The unusual drumbeat picked up in recent days amid rising market volatility. Treasury Secretary Scott Bessent on Friday warned of a 'detox' period for the economy as the Trump administration hacks away at federal spending. Trump himself followed over the weekend by declining to brush off rising fears of an economic downturn, saying 'there is a period of transition' necessary to bring wealth back to America.
'You can't really watch the stock market,' Trump later said, a sign of how much Trump 47 is operating in a vastly different mindset than Trump 45 — a man who closely watched stock indices and loved to claim credit for gains on his watch. This time, he isn't thinking about reelection for himself — or for anyone in his party.
The two-week slide in stocks — including another nosedive today — largely reflects mounting uncertainty driven by Trump's reordering of the world's economic order. The president is proudly tearing up America's decades-old playbook on global trade, immigration and the role of government. 'These latest economic pressures are largely of the president's own making and will test his appetite for weathering short-term economic uncertainty and political backlash in the hope of long-term economic gain,' POLITICO's Megan Messerly, Sam Sutton and Victoria Guida write today.
How does Trump's take-your-medicine strategy play out? Watch for several lines of argument in the coming months as long as the economic gauges look worrisome:
Trump and his aides are trying to deploy a blame-Biden strategy, crediting the former president for anything they inherited. That won't work if the economic data — from consumer sentiment to hiring rates — show an unmistakable drop just as Trump's rapid-fire policies began over the past seven weeks.
For now, Trump's team is banking on 'animal spirits' — the sense of optimism seen in CEO surveys and among small-businesses eager for deregulation. They're hoping the wave of domestic investment announcements can counter the mounting signs of uncertainty, such as the Delta Air Lines warning this afternoon about softening demand.
The reality is that much of Trump's change will take far longer than an election cycle to execute. Tariffs won't make American factories suddenly sprout from the ground; they take years of planning, requiring a stable policy environment. Anyone running as a Republican in 2026 has good reason to sweat today's recession chatter and the 'period of transition' ahead.
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What'd I Miss?
— Supreme Court will take up state bans on conversion therapy for LGBTQ+ children: The Supreme Court agreed today in a case from Colorado to decide whether state and local governments can enforce laws banning conversion therapy for LGBTQ+ children. The conservative-led court is taking up the case amid actions by President Donald Trump targeting transgender people, including a ban on military service and an end to federal funding for gender-affirming care for transgender minors. The justices also have heard arguments in a Tennessee case over whether state bans on treating transgender minors violate the Constitution. But they have yet to issue a decision. Colorado is among roughly half the states that prohibit the practice of trying to change a person's sexual orientation or gender identity through counseling.
— House Republican support grows for keeping clean energy tax breaks: A growing number of House Republicans are urging the party to preserve the clean energy tax credits in Democrats' climate law — and warning they may oppose the party's budget bill if those incentives get axed. In a letter shared exclusively with POLITICO, 21 House Republicans — whose districts have drawn billions in new investments because of the Inflation Reduction Act incentives — said developing clean energy was critical for the U.S. to meet President Donald Trump's goal of becoming 'energy dominant.' And they threatened to resist their colleagues' efforts to gut the law to help pay for a small fraction of the GOP's multi-trillion-dollar tax-cut package.
— Harvard pauses hiring amid 'financial uncertainties' under Trump: Harvard University leaders announced a temporary hiring freeze today, citing 'substantial financial uncertainties' as colleges and universities face widespread scrutiny of their federal funds by the Trump administration. The temporary freeze 'is meant to preserve our financial flexibility until we better understand how changes in federal policy will take shape and can assess the scale of their impact,' wrote Harvard President Alan Garber, Provost John Manning, Executive Vice President Meredith Weenick and Vice President for Finance and CFO Ritu Kalra in a message to faculty and staff. The university's pause on faculty and staff hiring comes after the Trump administration pulled $400 million worth of grants and contracts at Columbia University on Friday for 'failing to address' antisemitism.
— Trump lauds ICE detainment of Palestinian activist who helped lead Columbia University protests: President Donald Trump touted the arrest of Mahmoud Khalil, the Columbia University graduate student and Palestinian activist detained by Immigration and Customs Enforcement over the weekend — signaling a larger campaign to punish anti-Israel protesters on college campuses. 'This is the first arrest of many to come,' Trump said in a Truth Social post today, linking Khalil's detainment to his previously signed executive orders to combat antisemitism on college campuses.
— Trump admin formally revokes a raft of Biden officials' security clearances: U.S. spy chief Tulsi Gabbard announced today she formally revoked clearances for a number of top Biden administration officials, following through on directives issued by President Donald Trump upon taking office. Gabbard, who serves as director of national intelligence and oversees the gamut of U.S. intelligence agencies, wrote in an X post that she revoked the clearances of former Secretary of State Antony Blinken, former national security adviser Jake Sullivan and former U.S. Deputy Attorney General Lisa Monaco. Monaco oversaw the prosecution of Trump supporters who stormed the Capitol on Jan. 6, 2021. Also in keeping with a prior announcement by Trump, former President Joe Biden will no longer receive the President's Daily Brief, a summary of key intelligence findings that is delivered to the president in the morning, Gabbard said. Former presidents have typically been allowed to receive the brief even after leaving office, though Biden suspended Trump's access to the briefings in 2021.
AROUND THE WORLD
GREEN NO DEAL — Germany's Greens are vowing to put an end to Friedrich Merz's paradigm-changing plan to invest massively in defense and infrastructure.
Greens leaders today said they would urge lawmakers in the party to reject a historic deal by Merz's conservatives and the center-left Social Democratic Party (SPD) to unleash hundreds of billions of euros of new spending to bolster the military and invest heavily in the economy. In order to pass the proposed bills as soon as next week, as Merz intends, he needs the support of the Greens.
'If the CDU and SPD think that, because of the security threat posed by Putin in the Kremlin — and, honestly, also Donald Trump in the White House — we will simply have to go along with this, then we reject that outright,' one of the party's leaders, Felix Banaszak, said today in Berlin, referring to Merz's Christian Democratic Union and the center-left Social Democratic Party, who are set to hold coalition talks following the Feb. 23 election.
If the Greens follow through on their rejection of the plan, the decision would put Merz in a bind. His plans to effectively exempt defense spending from the country's constitutional debt brake and create a €500 billion infrastructure fund require a two-thirds majority in the lower house of parliament, or Bundestag. If the sitting parliament doesn't agree, the far-right, pro-Kremlin Alternative for Germany (AfD) party and The Left, which opposes military spending, will have the strength to block the deal once the newly elected Bundestag convenes by March 25 at the latest.
SYRIA CLASHES — More than 1,000 people have died in two days of clashes and revenge killings in Syria as the country's security forces allegedly killed hundreds of civilians belonging to the Alawite religious minority, a war monitoring group said.
The Syrian Observatory for Human Rights said about 745 civilians were killed on Friday and Saturday in ongoing violence along the country's coast, along with 125 members of government security forces and 148 fighters from armed groups linked to ousted Syrian leader Bashar Assad. Syrian President Ahmad al-Sharaa called for national unity on Sunday, saying the country 'has the characteristics for survival' and that what is happening in Syria now is 'within the expected challenges.'
The clashes erupted on Thursday and marked a major escalation in the challenge to the new government led by Sharaa's movement Hayat Tahrir al-Sham, or HTS, three months after the insurgents took over following the removal of Assad from power.
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