In his speech to Congress on March 4th President Donald Trump painted a fantastical picture. The American Dream, he declared, was surging bigger and better than ever before. His tariffs would preserve jobs, make America richer still, and protect its very soul. Unfortunately, in the real world things look different. Investors, consumers and companies show the first signs of souring on the Trumpian vision. With his aggressive and erratic protectionism, Mr Trump is playing with fire.
By imposing 25% tariffs on goods from Canada and Mexico, also on March 4th, Mr Trump is setting light to one of the world’s most integrated supply chains. Although he belatedly delayed duties on cars by one month, plenty of other industries will suffer. He has also raised tariffs on China and has threatened the European Union, Japan and South Korea. Some of these duties may also be deferred; others may never materialise. Yet in economics as in foreign relations, it is becoming clear that policy is being set on the president’s whim. That will cause lasting damage at home and abroad.
When Mr Trump won the election in November, investors and bosses cheered him on. The S&P 500 rose by nearly 4% in the week after the vote in anticipation of the new president lighting a bonfire of red tape and bringing about generous tax cuts. His protectionist and anti-immigration rhetoric, investors hoped, would come to nothing. A stockmarket correction or a return of inflation would surely curb his worst instincts.
Alas, those hopes are going up in smoke….
La copertina del nuovo Economist. Gli Art Director non hanno mai avuto tanta materia prima. pic.twitter.com/rnuMWWYaN1
— Jeanne Perego 🥨 (@jeperego) March 7, 2025