Truth behind the US economy and where it’s heading with Trump’s tariffs

The economy under Trumpâ??s first month in office is not what he promised on the campaign trail and it looks to be an uncertain year for the average American, economists told The Independent

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As President Donald Trump’s trade tariffs on Canada and Mexico begin, the stock markets have taken a tumble with major retailers forecasting a gloomy 2025. The economy has held strong despite some economists voicing concerns with Trump’s policy - the question now will it continue or head to a recession?

The economy under Trump’s first month in office is not what was promised on the campaign trail and it looks to be an uncertain year ahead for the average American, economists said.

“Trump is really pouring gasoline on the fire in many cases by implementing across the board, indiscriminate tariffs,” Alex Jacquez, chief of policy and advocacy at Groundwork, told The Independent. “One month in, we are already starting to see some pretty concerning signs of economic weakness.”

“There are a lot of storms out there and they’re getting darker and darker,” said Mark Zandi, chief economist at credit rating agency Moody's.

“Americans should be worried,” Zandi told The Independent, adding that Trump’s tariffs will do “serious damage” if the president doesn’t walk them back soon.

The president’s highly anticipated 25 percent trade tariffs on Mexico and Canada took effect Tuesday and he also added an extra 10 percent levies on China on top of the 10 percent he imposed last month.

President Donald Trump’s trade tariffs will do ‘serious damage’ if they are not reversed, economists warned (Getty Images )

Within the first 10 minutes of trading Tuesday, the Dow Jones Industrial Average dropped more than 410 points, or 0.95 percent, from Monday while the Nasdaq Composite sank 135 points, or 0.81 percent. Both rebounded to better showings by midday.

Treasury Secretary Scott Bessent acknowledged that the U.S. is “in the middle of a transition” but shrugged off concerns over Wall Street’s tariff selloff while appearing on Fox & Friends Tuesday morning.

“Wall Street can continue to do fine but we have a focus on small business and the consumers,” Bessent told the network. “So we are going to rebalance the economy.”

Retail giants Walmart and Target were among those waving red flags. Last month Walmart issued a warning for 2025 that it would likely be a slower year for sales and profit and growth than last year. Executives also said that lower-income shoppers were struggling. Target also warned Tuesday of a decline of consumer confidence amid Trump’s tariffs.

At the start of the year, the U.S. economy was doing “exceptionally well,” Zandi said. Now, all indicators point to a possible recession on the horizon.

Retail sales, consumer spending, vehicle sales, manufacturing being down and consumer confidence are all causes for concern.

Zandi warned that the economy risks going from “gagging to choking” on the tariffs unless the administration acts. “If it continues on for another month, two, or three, then it will go from gagging to choking. And that’s recession.”

Within the first 10 minutes of trading Tuesday, the Dow Jones Industrial Average dropped more than 410 points, or 0.95 percent (AFP via Getty Images )

Jacquez, who was previously on the National Economic Council and advised President Joe Biden and Vermont Senator Bernie Sanders, agreed that a pattern is beginning to emerge.

“You are seeing pullback in consumer spending. You are seeing a downturn in consumer sentiment. You are seeing a hike in consumers’ expectations of inflation going forward. You are seeing a number of indicators that are not moving in the [right] direction.”

Families from low-income households are more likely to be hit by the trade tariffs than the wealthy. The tariffs would cost the typical U.S. household over $1,200 a year, according to a Peterson Institute for International Economics report.

“Everyone's gonna get hit,” Zandi said. But low- and middle-income households “are going to get harder.”

Bessent maintained that Trump’s priority is ordinary American families.

“One of the biggest wins for the American people, since election day and since inauguration, mortgage rates have come down dramatically,” he said Tuesday on Fox News. “The bottom 50 percent of Americans over the past two years have gotten crushed by these high interest rates.”

There is still an expectation from investors that Trump could respond to the markets and pivot on the trade tariffs, according to Zandi.

“But for each passing day that he doesn’t and he doubles down, investors are growing more and more concerned,” he said.

White House press secretary Karoline Leavitt said that the Trump administration is “truly working around the clock to bring down the cost of living for the American people,” and the president would address his economic agenda at Tuesday evening’s joint Congressional address.

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