If a surgeon operates needlessly on a patient, it’s medical malpractice. If a policymaker, by the same measure, destroys value, endangers livelihoods, and lowers living standards, it’s economic malpractice.
President Trump is committing economic malpractice, and he seems to be the only one who doesn’t know it. Trump perpetrated an epic blunder on April 2, which he macabrely called “Liberation Day,” by announcing the most sweeping set of import taxes since Herbert Hoover signed the Smoot-Hawley Tariff Act into law in 1930. Smoot-Hawley helped make the Great Depression “great” by choking off trade and shrinking the world economy. Trump’s tariffs will have a similar effect.
Investors get it, which is why the S&P 500 stock index (^GSPC) plunged by a dizzying 11% in just two days following Trump’s tariff unveilings. Businesses and investors are now preparing for a sad new world of lower profits, higher inflation, rising unemployment, and worse. In the 10 weeks since Trump has been in office, the economy has lurched from a “soft landing” and record-high stock prices to the precipice of recession, all of it Trump’s doing.
Trump’s insouciance is comically terrifying. “The operation is over!” Trump posted on social media on April 3, as stocks were mid-plunge. “The patient lived, and is healing. The prognosis is that the patient will be far stronger, bigger, better and more resilient that ever before.” Trump’s “patient” is the US economy and the “operation” is his administering of tariffs.
The operation isn’t over, however, and the patient has only begun hemorrhaging. Experts offering second, third, and fourth opinions say the patient is getting worse, not better, and whoever performed the operation bungled it badly. To completely torture what was a dreadful metaphor to start with, the patient was poorly prepped for surgery and is now suffering even more needless harm as a result.
Trump, in short, decided to operate on an economy that didn’t need it. When Trump took office less than three months ago, the US economy was the strongest in the world and envied everywhere. The United States recovered from the 2020 COVID shock faster and in greater measure than any other advanced nation. Despite elevated inflation from 2022 to 2024, a “soft landing” was clearly underway, with inflation returning to normal levels while employment and growth held up.
The outlook is much bleaker since Trump got his hands on the patient. Economists across the board are slashing their outlooks for economic growth and raising their estimates for inflation and unemployment. Back in January, Goldman Sachs, as one example, expected GDP growth of 2.4% in 2025, with the unemployment rate at the end of the year around 4% and inflation close to normal at 2.4%. With Trump’s emergency intervention now underway, Goldman expects GDP growth below 1%, unemployment of 4.5%, and inflation of 3.5%.
FILE PHOTO: U.S. President Donald Trump reacts before boarding Marine One, while departing the White House en route to Florida, in Washington, D.C., U.S., April 3, 2025. REUTERS/Carlos Barria/File Photo ·REUTERS / Reuters
The whole economic outlook is darkening because Trump’s tariffs will make a vast range of products more expensive. That, in turn, will lower corporate earnings, depress investment and hiring, and lead to layoffs as companies brace for a downturn. Consumers were spooked by the prospect of Trump’s price hikes before his tariffs even went into effect, and they’ll rein in spending now that the actual tariffs are doing real damage. Plunging stock values will produce a panicky wealth shock as Americans watch their portfolios shrink and cut their own spending as a result.
Most of the current forecasts don’t yet take account of trade-partner retaliation, which will harm the patient even more. China, for instance, announced a new 34% tariff on imports from the United States on April 4, which could goad a furious Trump into even higher tariffs on Chinese imports. Partner retaliation will put American exporters, especially farmers who produce much of the world’s food, in peril. As the trade war escalates, as it did in the aftermath of Smoot-Hawley in the 1930s, a slow-growing economy will begin to shrink and the Trumpcession will be here.
Trump is supposedly doing all this to make foreign products more expensive, lure more production back to the United States, and return the US manufacturing sector back to the heyday of the 1950s, when it was the world’s most dominant. Yet few besides Trump think this is likely, or even desirable.
“This White House trade strategy is both nonsensical and unachievable,” David Rosenberg, chief economist at Rosenberg Research, wrote in an April 4 analysis. He points out that Trump, for years, has been fixated on the fallacy that a US trade deficit with other countries is in some way a subsidy or a gift. In reality, the US has benefited for decades from trade that allows Americans to continually innovate and invest in businesses that promise the highest returns, while enjoying cheap products from elsewhere.
“The President and his team believe that trade deficits are ‘subsidies,’pure and simple,” Rosenberg wrote. “That is patently absurd. If these policies stick, there is little doubt a recession will be staring us in the face.”
There is a way to stanch the bleeding, but only if Trump himself realizes that he’s butchering the patient and needs to hand the job over to better-qualified professionals. It could happen, if trade partners make concessions that give Trump a way to save face and stitch things up before the damage becomes severe. But there’s no evidence Trump realizes that he’s in over his head or that the 1950s aren’t coming back. Stock up on bandages while you can still afford them.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
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