Trump's policies face a mix of challenges with tariffs, immigration, and layoffs. Can the U.S. economy withstand the pressure?

The latest trade war initiated by US President Donald Trump is the largest scale of trade protectionism behavior in the United States since the 1930s, which may hinder US economic growth in the short term - just one of the many impacts facing increasingly tense consumers, businesses, and investors. In addition, Trump has cut federal labor, restricted immigration, and may drag down business investment in a situation of policy uncertainty. The growing consensus among economists is that all of these factors together mean that the economy of the world's largest economy will slow down. Few people believe there is a risk of complete economic contraction this year, and there are measures such as tax cuts that are favorable to growth in the works. However, the shadow of a "Trump recession" has already appeared. The escalating trade war of tit-for-tat tariffs will only exacerbate this impact - Trump is expected to deliver a speech in Congress on Tuesday night, and he explicitly stated that in addition to the tariffs just imposed on Mexico, Canada, and China, he will impose more tariffs. Future targets include the EU, automobiles, pharmaceuticals, semiconductors - and "reciprocal" tariffs calculated by Trump aides based on the various barriers faced by American goods overseas. With signs of slowing economic growth and rising inflation becoming increasingly clear, the wave of tariffs is reaching its peak. Consumer spending in January saw the largest decline in nearly four years, and confidence has weakened. Factory activity declined last month, while the price of raw materials soared to the highest level since June 2022. Can the US economy withstand the storm of Trump's policies? Analysts warn against overly interpreting data from individual months, especially data affected by severe weather. The Atlanta Federal Reserve's GDPNow real-time forecasting tool predicted on Monday that the economy would contract by 2.8% in the first quarter, but this is an outlier. Most indicators do not indicate a severe economic recession. David Solomon, CEO of Goldman Sachs Group, Inc., said on Tuesday at a conference in Sydney that the likelihood of a US economic recession is "very low." Trump and his team argue that a thorough reform is needed to rebuild the struggling American industry due to decades of trade deficits, and to bring back high-paying manufacturing jobs to the United States. Treasury Secretary Scott Bessant refuted concerns about the effects of tariffs and the resulting global market downturn. It is understood that global stocks are falling, with the S&P 500 index nearly wiping out post-election gains. "We will rebalance the economy," Bessant told Fox News on Tuesday. "Our focus is on ordinary people in the medium term. Wall Street is doing well, Wall Street can continue to do well, but our focus is on small businesses and consumers." Both of these groups will feel the impact of new tariffs on about $1.5 trillion worth of US imports, accounting for more than two-fifths of total imports. As of Tuesday, the average tariff rate in the United States is at its highest level since the 1940s. Economists at Bloomberg Economics, Meva Kusin and Lana Sajadi, believe that this alone is enough to increase the likelihood of entering a period of stagflation (slow growth and high inflation). They wrote, "These tariffs will have a negative supply shock on the US economy." According to calculations based on the model used by the Federal Reserve during Trump's first term, the latest tariff shock could lead to a 1.3% decrease in US GDP and a 0.8% increase in core inflation. Economists at Yale University's Budget Experimentation Laboratory predict that by 2025, the US economy will suffer about half of the economic growth impact, but they warn that the economic trauma could last for several years. They wrote that even after production shifts and supply chain restructuring, Trump's latest tariffs and retaliatory measures from other countries could still reduce long-term GDP by 0.4% - "equivalent to a permanent $80 to $110 billion reduction in the US economy per year." Tariffs are coming, retail warns: American families' wallets will need to "slim down" Retailers like Target Corporation (TGT.US) and Best Buy Co., Inc. (BBY.US) said on Tuesday that they expect tariffs to slow sales. Target Corporation CEO Brian Cornell said, "With almost nightly discussions about tariffs in the news, shoppers at Target Corporation stores have become very cautious, expecting prices to rise in the coming days." He specifically mentioned that during the winter, Shenzhen Agricultural Power Group supplies a large amount of strawberries, avocados, and bananas from Mexico. Nearly half of America's fruit and vegetable imports (including over 90% of avocados) come from south of the border. The new tariffs will also affect party regulars and clothing consumers. Three-quarters of imported beer into the US comes from abroad, with the majority being from Mexico. In terms of clothing, China accounts for nearly 30%. These numbers add up quickly. Mark Zandi, chief analyst at Moody's Corporation, said, "If all announced and threatened tariffs are actually implemented and continue to be enforced, the typical American household will need to spend an additional $1,300 per year to purchase the same goods as last year." These families have recently taken a hit from the skyrocketing cost of living after the COVID-19 pandemic - most experts believe this helped Trump get elected - and it is clear that people are concerned about inflation rising again. Expectations for inflation in the next year are at their highest levels since 2023, a long-term survey showing that inflation is expected to reach the highest levels in decades. In addition to directly impacting consumer wallets, industrial production and manufacturing employment are also at risk. Both industries saw declines during the trade war in Trump's first term in 2019. The US automotive industry, accounting for about 2.5% of the US economy, is particularly hard hit, with giants like Ford Motor Company issuing warnings. Over the years, the automotive supply chain has become increasingly interconnected with Canada and Mexico. Citigroup says the average American household will need to spend an additional $1,300 per year to purchase the same goods as last year.Even a brief interruption could lead to a one-percentage-point drop in annual GDP growth rates - Trump said, individual tariffs on automobiles will also be implemented.Trump's "economic storm": tariffs, immigration, layoffs Meanwhile, the threat of steel and aluminum tariffs set to take effect on March 12 has already caused domestic prices to soar, thus increasing costs for companies like Calder Brothers Corp. This company, located in Greenville, South Carolina, manufactures paving machines for driveways and parking lots, with an average retail price of $200,000. In addition to the recent increase in steel prices, the company is also feeling the squeeze from tariffs on overseas components, such as transmissions and hydraulic valves. Glenn Calder, president of the company, said the company is considering an unusually mid-year price increase. "These tariffs are really hitting small American manufacturers," he said. "People are very concerned about what changes in pricing of many goods will occur." While tariffs are currently the top concern for observers of the U.S. economy, many other government policies are also raising alarms. The crackdown on illegal immigrants that has already begun could lead to a shortage of labor that is difficult to quickly fill - especially in key industries such as meat processing. The deportation actions taken by the Trump administration so far may not cause too much damage to the economy. However, economists at Goldman Sachs Group, Inc. said that a general slowdown in immigration, with a decrease in net annual immigration numbers, could reduce potential growth rates by as much as 40 basis points compared to recent years. The spending cuts driven by the Department of Government Efficiency, under the Masque administration, have already led to more than 100,000 federal employees losing their jobs, with a ripple effect on many contractors. Economist Claudia Sam said that the DOGE itself may not be enough to trigger a recession, but through swift action and breaking with convention, it "amplifies the risk of a recession in two key ways." She wrote on Tuesday: "First, it temporarily concentrates economic impacts; second, it creates uncertainty that could impact CKH HOLDINGS employment." Sam pointed out that this is happening against a backdrop of slowing economic growth, persistently high interest rates, and continually rising tariffs. Trump has acknowledged that Americans may feel "some pain" from the trade war, but he said his agenda will bring huge long-term benefits. The government said that the tariffs, deregulation, and tax cuts already underway in Congress will combine to drive an investment boom. As evidence of the success of its tough trade policy, the Trump team points out that the world's largest artificial intelligence chip manufacturer, Taiwan Semiconductor Manufacturing Company, recently pledged an additional $100 billion in investment in U.S. factories. Another key component of this policy package is cheap energy. There are indications that Trump has already convinced oil giants Saudi Arabia and Russia to heed his call to increase production - which could lower oil prices and provide some relief for American consumers affected by tariffs. The U.S. economy has repeatedly shown its resilience and defied recession predictions. However, Stephanie Ross, chief economist at Wolf Research, said that the impact brought by Trump is worsening. She said, "If you were going to design something that really hurts the economy, this is it."