Donald Trump's economic policies have created what I would call a Schrödinger's economy--until the results of his economic policies begin bearing fruit, we will be unsure about whether the economic results will be very good, very bad, or pretty much the same as before.
There are lots of assertions that Trump is blowing up the world trade order, leading to inevitable raging inflation, economic collapse, and a world turned against the United States.
Could be.
Others are predicting that when the dust settles after Trump's negotiations with other countries bring new trade deals and massive reinvestment in America (as Ed pointed out earlier today, that massive investment is definitely happening), the country will enter a new golden age. Regulations are being stripped, NetZero is for now completely dead, and once the policies really bear fruit, Americans will be thrilled.
Could be. I sure hope so, and am cautiously optimistic that it will be so.
Companies shifted capital into business expansion in the US, presumably for the same reason imports flooded the zone -- the coming tariffs. Almost all of that increase came in the commercial sector; non-residential investment leaped by 9.8%, the biggest increase since 2023 Q2, and investment in equipment roared to a +22.5%, the best quarter in years. That indicates a lot of confidence in the economy long-term, as well as a shift in direction for supply chains, at least to some extent.
We also see another positive indicator in disposable personal income, which rose by 2.7% in Q1. That's the best number since mid-2023 and an indicator of positive growth in the economy. That is worth watching in the long term, too.
But the truth is that nobody really knows because there are far too many variables to make strong predictions, and the biggest unknown is whether Trump can pull a series of rabbits out of his hat.
Trump has been president for just over 100 days, so any claims that policies that require renegotiations of deals with over a hundred countries can be judged in that amount of time are absurd. For that matter, it has been only a month since "liberation day."
What people who are freaking out about Trump's seemingly chaotic process don't seem to get is that Trump is surrounded by some of the most brilliant economic minds in the world--practitioners of economics, not just academics with abstract theories, or outright dolts like Jared Bernstein (Biden's Chairman of the Council of Economic Advisors), who literally did not even understand why America has a national debt if we can print money.
This is absolutely priceless. And probably the most frightening clip you'll ever watch on the people in charge of the US economy.
— Arnaud Bertrand (@RnaudBertrand) May 3, 2024
Jared Bernstein is literally the Chair of the Council of Economic Advisers, the main agency advising Biden on economic policypic.twitter.com/1b31FPFPCQ
That man was in charge of Joe Biden's economic policies. Nobody criticizing Trump's policies today seems to think Scott Bessent, David Sacks, or any of the others in Trump's Dream Team can outthink Bernstein. Make of that what you will.
Still, Trump and his team may have a strategy--even a brilliant strategy--but battle plans rarely survive contact with the enemy. We really don't know whether that strategy will succeed. Trump's tactics are unpredictable, the tactics of our trade partners are not under our control, and events have a way of screwing up the best laid plans.
When will Schrödinger's box be opened to find out if the economy is dead or alive? Sometime next year, I assume. The success or failure of Trump's gambits will likely become clear before the midterms, and the answer will determine whether Republicans do well in 2026 or get crushed.
