As President Trump has rolled out his economic agenda, the assumption has been that he would quickly scale back his most aggressive policies once they began to scare consumers and the financial markets. But that assumption turned out to be wrong.Ben Casselman, who covers economics, and Maggie Haberman, who covers the White House, explain why Mr. Trump’s economic plan may be backfiring and why he doesn’t seem to mind.Guest: Ben Casselman, the chief economics correspondent for The New York Times.Maggie Haberman, a White House correspondent for The New York Times.Background reading: Mr. Trump has said a recession might be worth the cost. Economists disagree.Investors thought they had Mr. Trump figured out. They were wrong.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. Photo: Brandon Bell/Getty Images Unlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify.
Chapter 1: Why doesn't President Trump seem worried about the economy?
From The New York Times, I'm Michael Barbaro. This is The Daily. As President Trump has rolled out his economic agenda, the assumption was that he would quickly scale back his most aggressive policies once they began to scare consumers and the financial markets. That assumption turned out to be wrong. Today,
My colleagues, economics reporter Ben Castleman and White House reporter Maggie Haberman, on why the Trump economic plan may be backfiring and why Trump doesn't seem to mind. It's Friday, March 21st. Hey, Ben. Hi, Michael. Good to have you back in the studio. It's been a while.
It has been a while. Happy to be here.
Chapter 2: What initial enthusiasm did Trump's economic promises generate?
As you know, we're two months into the Trump administration and therefore two months into the Trump economy. And he comes to office with a set of sweeping economic promises that the business community and the stock market and polling shows Americans generally are very excited about. More prosperity, lower costs, lower regulation, lower taxes. The market booms when he gets elected.
Stock market is surging. And then Trump starts to actually put his fingerprints on the economy. And the stock market has, over the past few weeks, been plunging. And now the Federal Reserve is telling us that the country's financial outlook is pretty unsteady. And Trump himself is now acknowledging that his plans may wreak a certain amount of havoc on the economy.
So a lot has changed very quickly.
Yeah, I think that's right. I mean, it's worth winding back a little bit to what Trump inherited in the economy. Because by many measures, it was pretty solid, right? Unemployment was low. Job growth was solid. Corporate profits were good, right? There were a lot of things that were pretty good. We know there was one really big thing that was not good, right, which was inflation.
It had gotten a lot better. But we know cost of living had gone up and that was in inflation and it was in housing prices and it was in all sorts of things. And we know that Americans did not feel good about the economy, right? That was a big part of the reason that Trump was brought back to office in the first place.
So, as you said, when he is elected, there's a surge in optimism among businesses. There's a surge of optimism among many consumers. There was this sense, right, of the economy was actually in pretty good shape, according to the economists. And now it was maybe also in good shape, according to everybody else. And yet, in the last few weeks, all of that has turned around. All of that.
Markets are way down. Consumer confidence is way down. Business confidence, crucially, is way down. And so all of these measures of how consumers, how businesses, how investors feel about the economy have all taken a really sharp turn to the south. Now, that's how people feel. So far, most of the measures of actual activity
of what consumers are doing, of what businesses are doing, have not shown that same sharp deterioration.
But the risk, Ben, and I've learned this from you over the years, is that those eroding confidence and sentiment numbers become a self-fulfilling prophecy and they end up dragging down the hard economic numbers you just referred to.
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Chapter 3: How are Trump's government cuts affecting the economy?
Well, let's talk about those reasons. Let's talk about the mechanics of these confidence numbers falling so precipitously. In my mind, there are two major things that the president has done that have affected the economy to what degree I don't quite understand. The first being his very aggressive and abrupt efforts to shrink the government, laying off thousands of workers, closing agencies.
And the second, of course, is the tariffs he's imposed on goods imported into the U.S. Let's start with the cost-cutting to the government and how that has affected all the things you just talked about.
So it has, I think, potential effects in two different ways. One is just the direct effect, right? The layoffs of these workers, cancellation of programs, you know, rescinding of grants, right? All of that is real economic activity that has been pulled back. But the second piece of this is the confidence hit, right? Musk and Trump have cut however many thousands of jobs it is at this point.
But there are many more thousands of people who work for government contractors, who work for companies that sell to the federal government. And you can imagine all of them and all of their employers are feeling pretty uncertain right now. You look at what's happening in higher education. Major universities saying that they're pausing all hiring, right?
These are, in many cases, good, pretty high-paying, you know, important jobs that then maybe have ripple effects of lots of other jobs.
So this is how cutting government spending or threatening to withhold it starts to really affect consumer and business sentiment. And in this case, academic sentiment, but their hires as well.
It has that potential, certainly within the sectors that are most directly affected, is clearly having a big impact. You can think about it also on these programs, right? If you rely on veterans benefits right now, even if you have not had any difficulty getting your benefits.
The fact that thousands of people who work at the Veterans Affairs Department have just lost their jobs might influence how you feel about those benefits.
And there are rumors about what the impact might be on benefits. Absolutely. Absolutely. So these are all things that can have a sort of disruptive effect and that can lead people to pull back, can lead businesses to pull back on hiring.
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Chapter 4: What impact are tariffs having on the U.S. economy?
Because in all of these surveys, it shows people think prices are going to be higher. And they specifically say because of tariffs. And we're seeing that hit in terms of consumers expecting to pay higher prices. We're seeing that in businesses saying they expect to pay higher prices for the materials that go into their goods and then pass on those prices to consumers.
And we're seeing at least some evidence of it in actual prices. The Federal Reserve just this week came out and said there's some evidence at least that some of the recent pickup in goods inflation is the result of these tariffs.
Which means the tariffs are very quickly having a financial impact.
Which is what we would expect from the economic research. And I think that it's important to remember here, Trump ran on a platform of curtailing inflation. He even said he would bring down prices. And crucially, Americans who seem to believe him during the campaign that he would bring down prices or control inflation—
are now saying, we're getting nervous that this is going to mean higher prices, higher inflation.
Well, one reason why this nervousness seems understandable is that the president himself has started to change the way he talks about tariffs. Now, he seems to be acknowledging that tariffs can actually really be disruptive to the economy.
That's right. We've seen a real shift in messaging from the president himself and from members of his administration over the past couple of weeks. Trump occasionally would acknowledge on the campaign trail maybe prices would come up temporarily under tariffs. But for the most part, right, what he was talking about was my policies are going to turn around the economy on day one.
Next, I will direct all members of my cabinet to marshal the vast powers at their disposal to defeat what was record inflation and rapidly bring down costs and prices. And he said that even as recently as his inaugural. The American dream will soon be back and thriving like never before.
But over the last couple of weeks — There's an adjustment. We'll see whether there's pain. — union members of his administration have started talking about a period of adjustment.
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Chapter 5: Why are economists skeptical about Trump's economic policies?
But the president does not seem remotely deterred by what the economists say.
He's undeterred, but in a way it's even worse than that. Which is that so far he's been all over the map. We've seen tariffs announced and then they've been delayed. They've been imposed and then they've been paused. In some cases within days, in some cases on the same day, right, within hours. And if you talk to businesses, right, they don't like tariffs.
But what they really don't like is having no idea. They don't like uncertainty. They don't like uncertainty. Right. If you're a business right now trying to decide where to buy your goods from, where to locate your factory, you have no idea what the policy is going to be a week, a month, a year from now. And you could easily imagine businesses just sort of pressing pause and saying, you know what?
Let's hold off. Let's see where things are when the dust settles. And that has real economic consequences if they're not hiring, if they're not investing, and the downstream of that, right, so they're not hiring construction workers and they're not buying materials. All of that is the kind of thing that ripples through an economy and can cause a recession.
You're saying the only certainty that has emerged from the first two months of this Trump economic agenda is, is uncertainty and, to some real degree, pain.
And so far, Trump seems okay with that. I think there was an expectation on some level that he would change direction if the markets started to fall, if the economy started to sour, and maybe he will. But so far, that has not been the reaction from him or from his administration. They seem to be saying, we'll take the pain and Americans are going to have to deal with it. Well, thank you, Ben.
We really appreciate it. Thanks so much for having me.
After the break, Maggie Haberman on what the growing blowback over the economy has looked like from inside the White House. We'll be right back. So, Maggie, typically when economic data starts to show that a president's agenda is backfiring, the president tries to correct for it. That does not seem to be the case here with President Trump.
And you have been trying to understand what that looks like and why it is. So tell us what you found.
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Chapter 6: What is the uncertainty in Trump's economic strategy?
Trump's lesson appears to have been things didn't go that badly. The market didn't crash completely. Joe Biden kept some tariffs on in terms of China. My advisers were wrong. Tariffs are good and I can go bigger this time. But it was a very different economy then. It was a much more thriving economy. It was a pre-coronavirus pandemic economy, among other things.
All of which is to say that Trump thinks the real lesson of Term 1 when it comes to tariffs is that he went too small on tariffs and the costs were low. And if he can finally go much bigger on tariffs now in Term 2 because he's got the right advisors in place, the payoffs will be much bigger. The costs will remain low. But that feels like a real apples to oranges kind of comparison. Yeah.
It is kind of apples and oranges in a very different economy.
Are there people inside the administration saying to the president, look, Mr. President, of course we understand why you want to push for tariffs. We know how central it is to your message and your belief system. But you should know you're not really communicating it quite right. And the markets are very anxious about it. Perhaps there's something you can do differently.
There is a clear understanding in the administration that there is some whipsawing going on. So there was this meeting a week ago about how to handle the messaging at the Naval Observatory, which is the vice president's residence. And there was Howard Lutnick, the commerce secretary, Susie Wiles, the White House chief of staff, Jameson Greer, the U.S. trade representative, among others.
Some big shots. Big shots, very important voices in this discussion. And as we understand it, it was about dealing with the messaging and explaining to the public what is happening, trying to better explain what the tariffs are, when they might be coming. I haven't seen much evidence that that yielded a change in approach.
But its existence suggests that there's an understanding among the president's top aides and economic advisors that there's a problem here.
Correct. And... They are never really able to say the problem is partly stemming from the top. So it has to be how does the lower tier of people just below him deal with this when they're talking to television cameras and to reporters as opposed to saying the president is saying things that are complicated and convoluted.
And I've watched some of those interviews, and it seems worth saying how complicated it has become. I've seen the president's economic advisors go on TV and get asked a question like, can you please help us understand why the president is now saying that this new approach to tariffs might ultimately bring us into a recession? And the question is basically like, isn't that bad?
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