Trump's economic gamble hits early turbulence

Boston Globe

03-03-2025

Some souring of sentiment is understandable. President Trump's economic game plan is an untested break from the past.
There are cracks in the economy — there always are — but the foundation remains solid.
The latest:
Consumers retreated in January, reducing spending by the most in almost four years,
The 0.5 percent drop in inflation-adjusted personal outlays from the previous month followed healthy increases in November and December.
The Personal Consumption Expenditures index, the Federal Reserve's preferred inflation gauge, rose an annual 2.5 percent in the first month of the year, well above the central bank's 2 percent target, according to the report.
Surveys released last week showed declines in
Though bad weather might have affected purchasing, consumer confidence 'took large negative hits in January and February, as households have become shell-shocked by a quantum leap in economic policy uncertainty,' said Boston College economist Brian Bethune.
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Underscoring the rising uneasiness: The stock market in February gave back a chunk of the gains made since the November election. Yields on the 10-year Treasury, a benchmark for investors' views on the economy, have fallen on expectations that further weakening could nudge the Fed to cut interest rates.
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Why it matters:
Trump retook the White House with promises to rev up the economy. He said he'd cut taxes, regulations, and the twin budget and trade deficits while boosting energy production and bringing down prices.
Although the
GOP lawmakers are weighing
Behind the numbers:
Analysts blame the gloomier outlook mainly on worries that tariffs on the country's biggest trading partners will lead to a trade war that increases prices and hurts American exports.
Last week, the president said his previously announced 25 percent levies on goods from Canada and Mexico, and a doubling of tariffs on China to 20 percent, would take effect Tuesday. About $1.5 trillion in imports would be affected.
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Trump also warned he would impose a 25 percent duty on
Further stoking uncertainty: cuts to federal funding and mass firings of government workers ordered by Musk's Department of Government Efficiency.
Local impact:
Massachusetts has been roiled by the National Institutes of Health's decision to
Across New England, NIH funding supports nearly 25,000 jobs that generate more than $4 billion in economic output, according to Bjorn Markeson, an economist at IMPLAN, an economic software and analysis firm.
He estimates that the NIH's new 15 percent cap on reimbursements for indirect costs — down from as high as 70 percent — puts 10,000 jobs and $1.4 billion in economic output at risk.
'The impact is not just on research scientists,' Markeson said. It will also affect their suppliers and other businesses where they spend money.
Caveats:
The economic fears are real but the reality is more benign. Consider:
The job market remains in good shape.
Trump's tariff bark could prove worse than his bite if he uses threats of higher duties as a negotiating tactic.
Consumer confidence is prone to short-term swings.
With a month left in the first quarter, the
Final thought:
The economy is expected to grow at a respectable pace this year.
But the 2.3 percent median estimate of forecasters tracked by Bloomberg is down from the 2.8 percent increase recorded in the final year of the Biden administration. And inflation is expected to remain about where it is now.
'I think President Trump said that he'll own the economy in six or 12 months, but I can tell you that we are working to get these prices down every day, but it took four years to get us here,' Treasury Secretary Scott Bessent
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True, the real test of Trump's policies lies down the road. But the start has been less than auspicious.
Larry Edelman can be reached at