President Trump took office 101 days ago after a campaign in which the voters bought his argument that he could skillfully manage the economy and that his political prescriptions could both strengthen growth and eradicate inflation.
So, the news Wednesday that the gross domestic product of the country had contracted during the first three months of the year was a clear political shock as well as a flashing economic warning.
He arrived at the end of a quarter during which the equity prices fell sharply, the worst performance of Wall Street at the start of a new presidential term since Gerald R. Ford tried to withdraw the country from scandal and inflation 51 years ago. And that only added to the general uncertainty among companies and consumers on what the rest of the year could hold while Mr. Trump continues a trade war that already stifled supply chains and threatening to raise prices and lead shortages of components and critical products on the shelves.
It is too early to predict where the US economy is heading for the rest of the year, and Trump remains insistent to produce a burst of commercial transactions that will bring manufacturing in the United States back and inaugurate a new era of prosperity.
But the figures in the first quarter have put political risks for him. For Mr. Trump, what is at stake is a question of fundamental competence on a question he has always used to define himself.
If the report turns out to be a warning sign of a slowdown or a prolonged recession, the situation could become the economic analog of the stressed withdrawal of President Joseph R. Biden Jr. from Afghanistan four years ago this summer. Mr. Biden’s employment approval notes have never recovered from this early debacle. Nothing he did later – not the millions of jobs created, not the major legislative victories, and not the rapid response to the invasion of Ukraine by Russia – could restore the meaning of the voters to be trusted to carry out the work with the skills they assumed that he brought to it.
Trump was held in the Rose Garden on April 2, which he called the “Liberation Day” and deployed a wide and punitive set of commercial partners. He has promised that other countries will be begging for an agreement to reduce the samples and other prices he imposed.
A significant number of Americans seems skeptical. In a New York Times / Siena College survey Last week, 55% disapproved of Trump’s treatment of the economy, with 43% approval. About half of the voters have disapproved of trade treatment by Trump.
Some of Mr. Trump’s economic advisers now recognize that the calendar and the execution of his pricing ads could prove to be colossal errors, even if they applaud the underlying strategy. This is why, every few days, they announce new exceptions, more recently to relieve pain from American car manufacturers.
“On April 2, undoubtedly standing the most powerful place in the world, President Trump thought that he was planning the American strength,” said Matthew P. Goodman, who heads the Geoeconomics Center of the Foreign Relations Council and served under presidents George W. Bush and Barack Obama. “But he discovered that the trade is complicated, that you must be more surgical, and he must have given it since.”
Trump, the billionaire real estate investor, acknowledged that his strategy would bring temporary pain to the Americans, but seemed to affirm on Wednesday that it would hardly be noticed by ordinary Americans, at least in toy stores.
“Well, maybe children will have two dolls instead of 30 dolls, you know?” He said. “And maybe the two dolls will cost a few dollars more than normally.”
Whatever the cost of a Barbie, Mr. Trump faces a fundamental timing problem. It will take years to the enormous investments that it plans to take place in the United States to take place and cause the industrial Renaissance it has promised. The construction of the most sharp semiconductor manufacturing plant, for example, can easily take five years.
“These tokens, these beautiful chips, do these drillings in the United States,” Trump told the White House on Wednesday when he was addressed to the leaders and called to what extent had committed to spending new facilities in the country.
It is too early to find out how fast these investments will take off, including Apple’s commitment, again praised by Mr. Trump on Wednesday, to invest $ 500 billion, including a piece of manufacturing capacity in the United States in the next four years.
But the economic pain of prices could start in a few months, with upward pressure on prices and shortages of industrial products and consumption made abroad.
A large part of Mr. Trump’s political problem lies in this disconnection. For many products, Americans will pay more – especially Chinese manufacturing products – there is no American alternative. And for many others, producing them in the United States can make no sense.
Despite all his minimum of economic concerns, Trump is clearly sensitive to the prospect of being blamed for the price increase. When reports began to circulate this week that a subsidiary of Amazon was planning to publish the pricing customers who would pay on each product, Mr. Trump called Jeff Bezos, the founder of Amazon, to complain.
Giving consumers a rupture of the quantity of prices that cost them, said the White House, would be a “hostile and political act”. Amazon quickly said that he had never fully approved the plan and that he would not have entered into force.
But many business leaders are shaken by the environment, saying that they have no way of projecting their earnings for the second quarter because the economic environment has never been so opaque.
“I don’t stop telling them not to underestimate Donald Trump,” said David McIntosh, president of the Club for Growth, the anti-fiscal defense group whose members almost unanimously applauded Mr. Trump’s return.
Mr. McIntosh said it was optimistic that Trump succeeds in negotiating prices with Western style democracies that rank among the largest American business partners. “I meet a lot of executives who ask:” Ok, how does Donald Trump do this? ” And my answer is to look at “the art of agreement”, that he is chief negotiator. »»
The way to calm the markets now, he said, is to “advance the congress to make the tax reduction” and extend the tax reductions that Trump was promulgated during his first mandate.
Mr. McIntosh puts pressure on to extend this tax reduction, in particular by allowing companies to raft the cost of building new production facilities immediately, rather than depreciating these costs over the decades.
Trump can mark some early victories. The Treasury Secretary, Scott Bessent, said on Tuesday that “we are very close to India”. He added that South Korea “sent his team to to negotiate and that an agreement was also possible soon with Japan. Trump said Wednesday that the new Prime Minister of Canada Mark Carney had called him the day before and said: “Let’s make an agreement.”
Perhaps that, but Mr. Carney also had this to say on Tuesday after winning the Canadian elections: “Our old relationship with the United States, a relationship based on progressive integration, is over. The open global trade system anchored by the United States, a system on which Canada has relied since the Second World War, a system that, although not perfect, helped provide prosperity for a country during the decades, is over. “
Carney promised to reduce Canada’s dependence on his huge neighbor, no easy task because bilateral trade amounts to about a fifth of the country’s economy. China, the most powerful player in Mr. Trump’s business wars, continued a similar strategy. And his chief, Xi Jinping, has any incitement to return the next months as painful as possible for Mr. Trump.
Mr. XI largely maintained the radio silence since Mr. Trump announced a set of climbing of prices on Chinese products, settling down 145% after several anger movements and counter-modes with Beijing. This rate is so high that it essentially freezes trade; There are already cargos reports loaded with goods which have returned, so that the importers do not have to pay these prices.
Mr. Trump’s bet is that Mr. Xi flashes first because the pain for the Chinese economy will be so large that he will have to hit housing which, over time, will allow the United States to return to something approaching normal. Mr. XI is betting the opposite: that Mr. Trump has exceeded and cannot withstand bad GDP figures, an increase in inflation or polls.
Only one of them is right.