In the face of market chaos and decrease in stock and bond indicators last week, US President Donald Trump did not hesitate to resort to the palliative language, describing the state of panic as just a “simple concern” between investors, and considered that what is happening is just a “transitional cost” in the way “a wonderful rebuilding of the American economy.” “In the end, it will be very beautiful,” he said.
But a report on Economist raises sharp questions about the authenticity of this novel: Is short -term pain already limited as Trump depicts it? Are long -term gains possible in light of this confusing political path?
Anxiety in the short term … The recession is approaching
Modern economic indicators indicate that the short -term pain that Trump promised to overcome may be more severe than announced.
- The consumer confidence index issued by the University of Michigan collapsed in April to 50.8, and it is its second lowest level in its history. The main reason is the Americans’ concerns about the high prices as a result of customs tariffs, as consumers expect 6.7% in the next year, which is the highest percentage in more than 40 years.
- The small business optimism index issued by the National Union of Independent Business declined for three consecutive months, which reflects the decline in confidence in the economic agenda of the president after companies were betting on supportive reforms for growth at the beginning of its second term.
- Although labor market data is still positive, spending data using credit cards indicates that consumers may accelerate their purchases of cars and electronics in order to calculate the high prices, which means that these positive indicators may not last.
- On April 9th, and with the entry into force in the entry into force, Goldman Sachs analysts expected 65% to enter the American economy in a stagnation. During the next 12 months. After Trump announced the postponement of some drawings for 90 days, this possibility fell to 45%. However, according to the report, this sharp shift expresses the fragility of the economic reality, as the fate is dependent on the fluctuations of the president’s mood in commercial policy.
Long -term danger … less investments and weaker economy
In the long run, the Economist magazine report believes that the consequences will be deeper and more dangerous. As commercial protectionism rewards the weak sectors, and turns capital and employment into ineffective industries.
According to the World Bank study in 2022, raising customs duties by 4 percentage points leads to average domestic product by 0.4% in five years, and a decrease in work productivity by 1%.
However, the customs duties imposed by Trump beyond those historical levels, as the average actual fees in the United States increased from 2.5% in 2024 to more than 20% this year, even after exceptions on smartphones and electronics.
The fees also affect not only trade, but also the movement of capital. Since the beginning of last April, US Treasury bonds have increased for ten years by half a percentage, which means a decrease in foreign demand for American assets.
In the long run, American families and companies may be forced to finance the internal government debt at the expense of private investment.
Simulating form .. GDP will decrease by 8%
According to the budget model issued by the University of Pennsylvania, the customs duties imposed by Trump will lead during the next three decades to:
- GDP decreased by 8% from the previous track.
- Wages decreased by 7%.
- The national capitalist stock decreased by more than 10%, which means more deteriorating roads, older airports and outdated factories.
Mood -based economy
Economist warns that the state of uncertainty caused by Trump’s commercial policies has become a double compared to what it was during his first trade war in 2018. This is not only due to the nature of the fees, but to the “threat, then implementation, then retreat” course.
While it is not possible to categorically trust in economic expectations for decades, evidence indicates a clear result: the current damage is confirmed, and the future is fraught with greater risks.
While Trump dreams of a “rebuilding economy”, the reality refers to America with bright assets, slow growth and stagnant wages.
The newspaper concluded its report by saying that while Trump promotes the idea of ”temporary pain and future gain”, it seems that the current cost is fatal, and remote promises lack the solid economic foundations.
