While Trump is trying to upend global trade and undermine global growth, it’s also becoming apparent that the “savings” Musk is claiming are grossly overstated and, in any event, are inconsequential when set against the scale of government spending.
He and his youthful acolytes are, however, sewing confusion and dysfunction within the agencies even as other Trump appointees, like Defence Secretary Pete Hegseth, or Health Secretary, Robert F. Kennedy Jnr., are only just starting to contribute to the that cause.
Donald Trump is starting to rattle Wall Street. Credit: AP
It’s little wonder then, that Wall Street is becoming unsettled, or that consumers are becoming fearful.
The Conference Board consumer confidence survey, issued on Tuesday, showed US consumer confidence has fallen more this month than at any time in the past three and a half years. The board’s index fell 7 points in the February survey, the third straight monthly decline.
Consumers are pessimistic about labour market conditions, as well as the outlook for their finances and business conditions. There’s a growing proportion of them who expect a recession within the next year.
It’s the mix of tariffs and the mass firings (or attempted firings) of government employees that appears to be unsettling the consumers. Separate surveys have shown their expectations of inflation are at their highest levels in nearly 30 years.
It’s probably not helping consumer confidence that the House Republicans in Congress are trying to pull together a “big, beautiful bill” (which is how their leaders now describe it) that would slash $US2 trillion ($3.2 trillion) from government spending, including big cuts to social welfare and medicare programs – in order to partly fund Trump’s $US4.5 trillion of tax cuts for the wealthy.
Trump’s Treasury Secretary, Scott Bessent, has said his economic plan is to cut the US budget deficit from 6.4 per cent of GDP to 3 per cent, lift GDP growth (2.8 per cent last year, but fading) to 3 per cent and increase oil and gas production (which is already at record levels) by 3 per cent.
He has also said that the administration’s focus would be on lowering the 10–year bond rate, which influences all interest rates within the US economy, including the cost of government debt.
The US inflation rate has proven stubborn, indeed it rose slightly last month. The Federal Reserve Board is therefore sitting on its hands, not expecting to lower rates again until the second half of the year, if at all.
Trump’s tariffs and his immigration policy – deporting millions of undocumented immigrants – are inherently inflationary.
Despite what he says, and may believe, tariffs are paid on goods once they have landed within the US and by the importer, not the exporter. Most of their cost is then either absorbed by the importing company, lowering profits, or passed onto consumers, increasing prices and inflation.
It’s that growing fear that – rather than the bonanza that investors and the big tech and energy companies that supported Trump had envisaged – the administration might bungle its way into recession, which seems to be unsettling Wall Street.
Fewer of the lowest income workers inevitably means higher labour costs, and more inflation, although Trump’s promise to round up and deport illegal immigrants in their millions appears to be proving easier said than done, despite the massive level of resources the administration has assigned to the effort.
Investors in the US, and consumers, are therefore reacting rationally to the prospect of more inflation and less growth than they foresaw last year in the immediate aftermath of the election.
There is a possibility that, instead of the high–growth, low–inflation, lower interest rate environment Bessent is targeting, the US ends up with a low–growth economy but one with still–high inflation and interest rates – stagflation – because of Trump’s policies.
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It’s that growing fear that – rather than the bonanza that investors and the big tech and energy companies that supported Trump had envisaged – the administration might bungle its way into recession, which seems to be unsettling Wall Street.
The erratic nature of the administration and the eccentric (to be polite) nature of some of those Trump has appointed to lead key agencies is contributing to the sense that America is deliberately destabilising (if not quite destroying) itself, along with much of the rest of the world.
Trump and his advisers believe they are dismantling the “Deep State” and a parasitic world order but, even if they were more effective in executing their plans than they have been to date, America would emerge diminished by the effort, with the geopolitical landscape tilted heavily towards China.
That’s not what Trump intended, or Wall Street expected.
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