The U.S. economy is being buffeted by a range of actions — some implemented, others threatened — by President Trump.
There is no historical parallel for this. Never has a single American official created so much chaos and imposed so many self-inflicted wounds on the U.S. economy in so short a time. Some of these wounds are being felt now or will be soon; others will be felt over the longer term.
Here are six actions either already taken by Trump in his first 100 days, or now being planned, and how their cumulative effects will damage the American economy in the short and long runs.
1) DOGE cuts: The chainsaw that Trump and Elon Musk are taking to the federal workforce is unprecedented. It will likely eliminate at least 100,000 jobs, and perhaps many more (unless the courts reverse them). The numbers of contractors and grantees losing their jobs could well be larger. Though its impact on the labor market of 170 million workers will be modest, these cuts are being undertaken with no careful analysis of how to trim federal excess without threatening important services on which Americans depend — like making sure their Social Security checks arrive on time.
Trump and Musk’s cuts to the IRS could generate much larger budget deficits, as the ability of the federal government to raise needed revenues to finance what it spends will be greatly reduced. Fewer and fewer Americans with strong skill sets will apply for government jobs. And the ability of our government to provide services competently and honestly will broadly decline.
2) The war with universities: On top of the damage done to principles of free speech and expression, Trump’s war on the best American universities goes far beyond a stated need to rein in controversial DEI practices or fight antisemitism. Cuts to federal funding there are impeding important research on health care, education and the economy more broadly. Obstructing this research over time could leave the U.S. a sicker and less educated nation, with lower future economic performance and productivity.
3) Tariffs: As most economists have pointed out, Trump’s tariffs will have stagflationary effects — raising prices and reducing the economy’s output and employment. The tariffs will generate major price increases that are passed onto consumers, while foreign retaliation will reduce employment in our export industries. The foreign competition that helps fuel efficiency and productivity will fall as our global economic order weakens. And the chaos resulting from the sloppy implementation of tariffs is already reducing foreigners’ willingness to buy U.S. treasuries, thus raising interest rates and making our public debt that much harder to finance.
4) Threats to the Fed’s independence: Trump has threatened to fire Fed Chair Jerome Powell and install a lackey in his place who would rapidly lower interest rates. This would make it impossible for the Fed to engage in sensible and credible monetary policy to fight inflation. It will lower the confidence of domestic and foreign investors that the U.S. is a safe economic haven for their resources, and ultimately raise interest rates and hurt the values of the dollar and other financial assets.
5) Planned deportations: If mass immigrant deportations are carried out, they will harm industries such as agriculture, residential construction, non-durable manufacturing and household services, especially in regions that have come to depend heavily on such labor. Fixing the border and reforming immigration are desirable; driving out millions of immigrants in a short time is harmful. And fewer immigrants will want to come to the U.S., even legally, to study or work here — at a time when our native-born population is too thin to generate a strong and growing labor force.
6) Planned tax cuts: By all indications, congressional Republicans are intent on moving forward with a massive tax cut bill, heavily tilted toward the rich, that will dramatically raise U.S. public debt. On top of extending the tax cuts Trump implemented in his first term (which have a 2025 sunset date), he pledges to add trillions more. While the initial effects of this tax cut will be to stimulate the economy and somewhat counteract the recessionary effects of the tariffs, the cuts will be an additional source of inflationary pressure and increase long-term debts that will be more damaging.
The sum of all of these policies will be higher inflation and lower output and employment in the short run; and, if they are not reversed, vastly higher debt and weaker foreign investment and productivity in the longer term that will reduce our living standards and destabilize our economy. Trump’s attacks on the rule of law will encourage corruption and “crony capitalism,” further weakening the economy. The risk of recurring financial crises, in which foreign funds flee the U.S. due to declining confidence in our economic stability, will run high.
Of course, the threats to civil society and democracy from a law-flouting president will create damage that goes well beyond the economy.
Still, as the economic costs of Trump’s many damaging actions rise, the need for legislators in both parties and the judiciary to push back and protect the economy become more urgent with each passing day.
Harry J. Holzer is the John LaFarge, SJ Professor of Public Policy at Georgetown University and a fellow in Economic Studies at Brookings. He is a former Chief Economist of the U.S. Department of Labor.
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