The U.S. economy is often compared to a cruise ship—it takes a lot of time and force to change its direction. That’s why many economists looked at the strong economy inherited by the Trump Administration and projected a continued period of fast growth, low unemployment, declining inflation, and a healthy stock market. However, President Donald Trump’s economic strategy has been less about turning the rudder and more about firing torpedoes at his own ship.
The reversal in economic data since the Trump Administration took over has been historically rapid—and devastating. The stock market is in free fall. Interest rates are also plummeting, but not for any good reason—investors assume the Federal Reserve will soon need to step in aggressively to rescue a collapsing economy. Unemployment insurance claims for federal workers have noticeably increased even before the full force of the Department of Government Efficiency (DOGE) layoffs has been recorded.
Of course, economic data is reported retrospectively, but real-time economic indicators, known as "nowcasts," suggest that GDP growth for the first quarter of 2025 is collapsing. Some projections even point to outright economic contraction. If this continues for another quarter, the U.S. will officially be in a recession. Worse still, economic policy uncertainty is now rivaling or exceeding levels seen during the most volatile periods of the COVID-19 pandemic.
None of this had to happen. It took a series of policy blunders to manufacture this self-inflicted economic mess.
The Tariff Tantrum
Trump’s trade policies have been chaotic, with constant shifts that threaten to destabilize the economy. While tariffs get a lot of the headlines, the real issue is the overall uncertainty his administration has created for businesses. Companies rely on stability to make investment decisions, but with Trump threatening new tariffs and rescinding them at will, firms have no idea what the future holds.
His obsession with tariffs has led to higher costs for businesses and consumers alike. U.S. manufacturers rely on imported raw materials, and when tariffs make those inputs more expensive, production costs rise. Those costs are then passed on to consumers, contributing to inflation. And despite Trump’s claims, tariffs are not paid by foreign countries; they are paid by American companies and consumers.
The DOGE Disaster
One of the administration's most damaging policies has been its assault on the federal workforce. Trump and his allies have openly stated their goal of gutting federal agencies. Russell Vought, now director at the Office of Management and Budget (OMB), even said, “We want the bureaucrats to be traumatically affected… We want their funding to be shut down.” Mission accomplished.
The layoffs of federal workers and contractors are already creating ripple effects across the private sector. Federal employees provide essential services that businesses depend on. From food safety inspections to infrastructure maintenance, the private sector benefits greatly from a functional government. By deliberately crippling federal agencies, Trump is harming not just government workers but the entire economy.
The claim that many federal workers "don’t work at all" is pure fiction. In reality, the federal workforce provides tremendous value at a bargain price. Cutting their numbers arbitrarily doesn’t create efficiency—it creates dysfunction.
The Immigration Implosion
Trump’s plans for mass deportations would deliver a major supply-side shock to the economy. Many industries, particularly agriculture and construction, rely on immigrant labor. Removing large numbers of workers from these sectors would cause price spikes in food and housing. Already, business leaders are factoring in the possibility of mass deportations, leading to stalled hiring and investment.
Beyond the economic impact, mass deportations would be a logistical and humanitarian nightmare. The U.S. economy depends on labor from undocumented workers, and forcing businesses to operate without them will lead to production slowdowns, worker shortages, and rising costs for consumers.
The Medicaid Meltdown
The Trump administration’s proposed Medicaid cuts would create a double economic blow. First, they would force low-income Americans to spend more out-of-pocket on healthcare, reducing their ability to spend on other goods and services. Second, they would likely lead to the closure of rural hospitals, which are already operating on thin margins. These closures would cost jobs and leave many communities without essential healthcare services.
Medicaid spending isn’t just a cost; it’s an economic stabilizer. Cutting it would remove billions from local economies and exacerbate economic downturns.
The Business Confidence Collapse
One of the most striking indicators of the Trump administration’s economic mismanagement is the collapse of business confidence. Measures of economic policy uncertainty have surged to levels last seen during the worst days of the COVID-19 pandemic. Business leaders, who once looked forward to a stable economic environment, are now unsure of what policies will come next.
Even among wealthy investors—a group that historically benefits from Republican policies—there is growing concern about the direction of the economy. If businesses are too nervous to invest, economic growth stalls, job creation slows, and recession looms.
Conclusion: An Avoidable Crisis
Trump inherited a strong economy and managed to kneecap it within months. His administration’s policies have sent shockwaves through the stock market, weakened business confidence, and threatened working Americans with layoffs, deportations, and lost benefits. It didn’t have to be this way.
The self-inflicted wounds to the economy will have long-lasting consequences unless dramatic policy reversals are made. The U.S. economy isn’t a small boat that can quickly correct its course—it’s a massive ship that takes time to turn. But instead of steering it safely, Trump seems determined to sink it from within. If economic sanity doesn’t return soon, the damage will be severe, widespread, and entirely unnecessary.
