Trump and the Economy

For the most part, in these blog posts, my intention is to focus on moves towards autocracy and the attendant corruption that normally accompanies such efforts. But another common characteristic of autocracies is incompetence. In a way, this is counterintuitive because one of the primary justifications for autocratic regimes is that they are effective and can get things done. In reality, this is often not the case. Contrary to popular belief, Italian dictator Benito Mussolini did not make the trains run on time. During his rule, Italian trains were just as likely to be late as during earlier periods. He was, however, successful in creating this myth. Similarly, cult leader, convicted felon, and failed President Donald Trump has been considered a strong leader on economic issues and good for the economy. Supporters cite his background as a businessman and a very rose-tinted-glasses view of his first term. While I believe that former President Joe Biden did an objectively good job with the economy, inflation that persisted throughout his term (though reaching manageable levels in the latter part) convinced most voters otherwise. Indeed, the price of eggs became one of the major talking points of the Trump campaign. However, as things have turned out, much like Mussolini's railway timetable skills, Trump's alleged economic accumen has turned out to be nothing more than myth.

First, let's get right to the price of eggs, given the importance that this topic played in the election. Soon after Trump's inauguration, egg prices skyrocketed, reaching an all-time high of $8.17 a dozen in March of 2025. Since then, egg prices have recovered significantly and are currently $3.16 a dozen. Trump likes to say that egg prices are down, and that is true relative to the historic high earlier in his term. However, prices are still higher than those that existed during most of Biden's presidency. Obviously, a number of factors play into the price of eggs, and the President doesn't actually have a lot of influence over many of them. However, I didn't make the rules. The price of eggs became a key economic indicator, whether I liked it or not. On this measure, Trump is not succeeding.

Even Biden's harshest critics would have had to admit (though I am not sure most of them ever did) that the stock market performed extremely well during his presidency. When Trump was elected, many commentators predicted that, despite Trump's advocacy of tariffs, he would be convinced to leave things alone and not upset what was a generally good economy. But Trump couldn't do that and has, instead, caused global economic turmoil with his on-again, off-again, maybe-on, maybe-off, who really knows? tariff regime. This has gone over like a lead balloon in the stock market. The Wall Street Journal reported yesterday that the Dow Jones Industrial Average is headed for the worst April since the Great Depression. According to the report, "The S&P 500’s performance since Inauguration Day is now the worst for any president up to this point in data going back to 1928". In a search for scapegoats, Trump has fixated on Federal Reserve Chairman Jerome Powell, whom Trump blames for not lowering interest rates. The threat that Trump might fire Powell led to additional market turmoil and a further collapse of stock prices. This apparently scared Trump enough that he made a public denial of any plans to get rid of Powell. Similarly, Secretary of the Treasury Scott Bessent told a closed meeting of investors that he expected the current U.S. trade war with China to deescalate "in the very near future". Both of these statements caused a bump in stock prices. But it is ironic that the only thing saving the stock market from complete collapse is the administration essentially reversing itself.

It has also become clear that the U.S. DOGE Service has been a failure in its mission to increase efficiency in government. While DOGE has managed to upset the lives of tens of thousands, if not hundreds of thousands, of federal employees by firing many, putting some on administrative leave, hiring back some of those fired, and cutting entire departments or agencies, it has not been successful in saving money. Shadow President Elon Musk originally claimed that DOGE would be able to cut $2 trillion from the government's budget. This was never really a realistic goal — the entire federal discretionary spending budget is only $1.7 trillion — and now only predicts that $150 billion will be saved next year. Even that amount is doubtful because many of the alleged savings that Musk routinely touts were cuts that occurred during the Biden administration or involved programs that were otherwise halted. Yesterday, Senate Minority Leader Chuck Schumer sent a letter to Charles Ezell, the acting director of the Office of Personnel Management, requesting a copy of a $318 million request for proposal that Musk claims to have cancelled. While this is one of the larger cuts for which Musk takes credit, nobody can find any such RFP, and requests from the media have gone unanswered. It's possible that this savings does not exist outside of Musk's imagination. Making matters worse for Musk and DOGE, the U.S. budget deficit has grown to the second-highest six-month level on record. Republican plans to massively cut taxes for the wealthy will only make that worse.

The U.S. national debt as it now stands is already problematic, and Republican plans that will significantly increase it simply add fuel to the fire. But making things even worse is the unexpected behavior of the bond market. I am not a financial wizard, and I may get some of this wrong (please correct me in the comments if so), but my understanding is that the bond and stocks markets normally work inversely to each other. When stock prices are high, bond prices decrease, and bond yields increase. This is because, in a bull market, investors are choosing stocks that have higher returns. When stock prices drop, investors move to safer bond investments. This should cause bond prices to increase and yields to drop. But in the recent market, stock prices have dropped while bond prices have stayed low, and yields have risen. This is important to the U.S. government because its debt is financed by Treasury bonds. Increased yields mean that the government must pay more to service its debt. Any savings that DOGE has managed to find are being wiped out in increased interest payments.

There is a theory that Trump has not been concerned about, and may even favor, a drop in stock prices. In theory, this should lower bond yields, meaning that the U.S. pays less in interest on its debt. If this was Trump's intention, it failed miserably. There has been some speculation that bond prices have been impacted by coordinated efforts by other nations — perhaps led by Canada's Prime Minister Mark Carney, as retaliation for Trump's tariffs. It is true that after Trump announced reciprocal tariffs (this is what he called them despite this not being what they were), bond yields increased, reaching a crisis point significant enough to motivate Trump to change course and pause the tariffs. Speaking about the pause, Trump noted that the bond market was "getting a little queasy." I will repeat that increased bond yields mean higher costs for servicing our national debt. This is the worst possible situation for a debt increase as Republicans seem to want in order to cut taxes for the wealthy.

The upshot of Trump's mismanagement of the economy is that the Americans are feeling historically pessimistic about their financial situation. A recent Gallup poll found that a record-high 53% of Americans say that their financial situation is getting worse. This is the first time since 2001 that a majority has expressed financial pessimism. Put that in perspective: as bad as Americans felt about the economy during the Biden administration, they did not feel as bad about it as they do now. Moreover, things are going to get worse. J.P. Morgan reports that businesses are pausing investment and hiring. Similarly, the Richmond Federal Reserve Bank just issued a report showing that manufacturing is suffering a deep contraction. While this will hurt economic growth, the report shows that prices are still increasing. This is a classic "stagflation" situation. Just to toot my own horn, back on February 13, I predicted this would happen. I will reiterate that I am not a financial wizard. If an idiot like me could figure this out, what's going on with the great minds of the Trump administration?

I really don't see how the Trump administration gets out of this predicament. Trump can't simply replace a few administration figures or announce new policies because the problem is him. It is Trump, not his cabinet secretaries, that is obsessed with tariffs. He can end all tariffs tomorrow, but the possibility that he will wake up one morning and decide we need tariffs again will always exist. Nobody can count on what will happen tomorrow. Long-range planning is impossible. Countries are making arrangements with each other that leave the U.S. out. If China is happy with beef from South America, what incentive does it have to return to U.S. suppliers? There are several reports that container ships from China that were meant to sail to the United States either have not left port or have turned around mid-voyage. We could very well be facing shortages of ordinary goods within a few weeks. It may not be that the price of goods is prohibitive, but that they simply aren't available at any price.

To get back to where I started with this post, many voted for Trump despite their disagreement with many of his policies because they expected that he would be good for the economy. As it turns out, Trump is even more incompetent in that regard than his critics suggested. He has taken a stock market that was seeing historic highs and caused historic drops. While he hoped to decrease interest payments on the national debt, he has increased them. He promised to lower the prices of eggs, but has succeeded there only to the extent that he has undone some of the damage he previously did: eggs are not at the historically high prices they were earlier in his term, but they are still high. Trump wanted to increase U.S. manufacturing, but because of his policies, it is decreasing. He promised to end inflation, but it is continuing. By any possible metric, Trump has been a failure.