President Trump made a couple of key concessions on his tariffs in the past week: He admitted that companies pay the cost of the tariffs and that those costs can be passed on to consumers. On Tuesday, he made a third concession.
“I am doing this whether it’s good or bad for your statement about, ‘Oh, will we fall into a recession for two months?’ The fact is, somebody had to take China on,” Trump said when asked about most economists predicting a recession as a result of his trade war.
Trump’s tariff concessions are the latest example of his economic double-talk and come amid growing fears of a looming recession. You can watch numerous examples of Trump trying to have it both ways on the economy in the video above.
Economic indicators such as the yield curve suggest that a recession may be on the horizon, and Trump is (rightly) worried. Since the Civil War, only one president facing a recession in the final two calendar years of his term won reelection, as my colleague Aaron Blake noted last week.
Perhaps more than his predecessors, Trump has tethered the success of his presidency to the economy, even as it has closely mirrored or continued many economic trends that began under President Barack Obama. In June, Trump called Obama’s economy “weak” and has repeatedly called the economy during his own presidency the “greatest” in U.S. history.
Some of Trump’s economic policies probably have undermined his stated policy goals.
His tax cut has not produced the promised 3 percent annual economic growth or sustained business investment. Instead, GDP growth is now 2.2 percent over the past four quarters and business spending in the second quarter of 2019 was negative for the first time since 2016.
The tax cut partly contributed to the growing budget deficit, which had the effect of increasing, not shrinking, the U.S. trade deficit as consumers spent more, including on imported products. And Trump’s trade war has further increased the trade deficit, despite his claims that tariffs would reduce it. (Most economists do not worry about the trade deficit.)
Perhaps even more ironic is that Trump has ignored some of the same economic advice he gave Obama.
In 2011, Trump said the dollar was “pathetically weak” and was causing “rampant” inflation (it wasn’t). Now Trump has suggested that he wants a weaker dollar, even as devaluation could lead to a currency war, in turn possibly strengthening the dollar more, as the New York Times’s Neil Irwin noted this month.
From 2011 to 2016, Trump complained about the federal debt or deficit on at least 190 days. During the 2016 campaign, he said he would eliminate the national debt in eight years. Now, Trump’s own budget projects he will leave the debt at least 50 percent higher than the year he took office.
And in 2016, Trump baselessly accused Obama of forcing the Federal Reserve to keep interest rates low and called on the Fed to raise rates to guard against an economic “bubble.” Now he wants the Fed to lower its already historically low rates and has blamed the Fed for the potential economic downturn.
When the White House released its mid-session budget review last year, it projected 3 percent annual GDP growth through Trump’s presidency.
It also predicted that 2019 short-term interest rates would be 2.7 percent and long-term rates would be 3.2 percent, as the New York Times’s Paul Krugman noted Tuesday. Both rates are currently below 2 percent, meaning the Fed’s monetary policy is even looser than the Trump administration’s projection when it forecast 3 percent annual growth.
It was yet more economic double-talk from Trump.