Say Hello to “Trumpslump”

Bill Clinton became famous for his mantra: “It’s the economy, stupid.” Donald Trump, in his utter arrogance, neglects that political wisdom to his own great peril.

Under his mis-leadership, the United States might soon experience a serious Trumpslump, much sooner than even the most skeptical of his critics might have thought.

The reasons for the “Trumpslump”

The reasons for the Trumpslump are not his daily extra-constitutional actions that dominate the news cycle. Rather, it is the fact that the economic chicken may be coming home to roost sooner than anybody expected.

Trump’s constant threats of tariffs against the closest trading partners of the United States are shaking market confidence. Stock market indices are plummeting and moving towards or are in correction territory (10% decline).

Trump spreads Angst

The numbers aggregated by the Atlanta Federal Reserve Bank led the bank to project a 2.4% year-over-year contraction during the first quarter of 2025.

President Trump does not help the spreading Angst, when he suggested on March 9th that indeed a recession might occur as a result of his policies, a necessary detox period (as his Secretary of the Treasury dutifully opted to describe it).

Dropping like a stone

Consumer confidence is dropping like a stone. According to the survey by the New York Federal Reserve Bank published on March 10, “households expressed more pessimism about their year-ahead financial situations in February.”

Random, arbitrary and seemingly endless firings of federal employes and the closing of whole agencies or departments will have unpredictable consequences on the labor market as many private sector enterprises will lose government contracts.

A presidential vindictiveness machine

A growing movement of boycotting some of the largest U.S. enterprises, associated with President Trump, by Democratic supporters and citizens in countries, President Trump personally insulted, abandoned or threatened, will likely add to the downward pressure.

The Trumpslump may start in the first quarter of 2025 and, if the President makes his tariff promises finally come true, will continue in the second quarter which meets the conventional definition of a recession.

Trump effectively tying the Fed’s hands

Normally, the Federal Reserve Bank would lower interest rates in such a scenario. However, Fed Governor Jeremy Powell has important reasons to be cautious.

The Fed Chair has to consider an increasingly growing risk of rising inflation as tariffs raise prices, disrupt supply chains and lead to empty store shelves and a steep supply/demand mismatch.

When friends and allies are abused for target practice

Those vigorously attacked by Donald Trump, also once called friends of the United States, have already promised counter measures and taken first steps.

The incoming Prime Minister of Canada goes as far as promising that Canadian tariffs will remain in place until the United States shows Canada some respect. And the premier of Ontario has promised to cut off electricity to the Northern United States (1.5 million customers), while imposing a 25% surcharge in the meantime.

A government spreading chaos and anarchy

The outlook is bleak not only because of the actual or promised policy measures by the Trump administration, but because of the chaos and anarchy that it so feverishly spreads.

As is often noted, markets hate nothing more than uncertainty. And many times, matters can go south, even when they are not reflecting reality but because they become a self-fulfilling prophecy.

Next: Wrecking the Fed

When this happens, in line with his dictatorial behavior streak, President Trump will soon begin to “shoot” the messengers.

Trump will undermine the independence of the Federal Reserve Bank, fire its Governor and Board, and put in place his own people who will quickly lower interest rates causing inflation to rise to double digits.

“Going Chinese” on numbers

Of course, mimicking the behavior of Chinese Communist authorities, unpleasant economic numbers will simply no longer be reported.

Dressed up as a measure to reduce the government payroll, Donald Trump will also fire all central bank statisticians and replace them with his own goons.

Conclusion: The international fallout is unpredictable

In the end, it will hasten the collapse of the U.S. economy, the global abandonment of U.S. dollar as the reserve currency and only strengthen domestic authoritarianism. The international fallout is unpredictable.

Let us just hope a miracle happens and the U.S avoids the path of turning itself into a full-fledged banana republic.

The world of today badly needs constructive economic leadership. But that will be very hard. After all, Trump creates well more global chaos than just in the domain of sheer economics.