President Trump’s deportations, tariffs, federal layoffs and funding suspensions have generated nonstop headlines and frayed confidence, yet left surprisingly little trace on the economy. Hiring, spending and inflation look a lot like they did under Joe Biden. As Trump’s first 100 days draw to a close, Kate Linebaugh and Molly Ball explore the state of the U.S. economy with Chief Economics Commentator Greg Ip and try to understand what might be coming next. Further Listening: - Taking Stock of the ‘Sell America’ Trade - Inside the Harvard vs. Trump Battle - How Frog Embyros Landed a Scientist in ICE Detention Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: Who are the hosts and guest of this episode?
Hey, Molly. Hey, Kate. How was your break? It was wonderful. And while I love my job, it was great to get away.
And while you were away, were you able to get away from all things Trump?
Well, pretty much. I mean, interestingly, the vacation I took for my kids' spring break was to Panama, which you may have noticed has been in the news lately. As you might expect from, you know, locals and tour guides and so forth, there were a few references to the fact that this country has been in the news recently.
Did you go to the Panama Canal?
I did. I actually spent my birthday on the Panama Canal on Sunday. And it was really cool.
That's like the most Molly Ball thing ever. You chose to spend your birthday on the Panama Canal. So now that we're back, what's on your mind?
Well, it does seem like I missed a lot of gyrations in ye olde economy. Like there was a lot of back and forth about the tariffs and the deals and the economic stuff. And the markets. So I'm trying to catch up on where all that stands. All right, then. So let's dive in.
From the Journal, this is Trump 2.0. I'm Kate Leinbaugh. And I'm Molly Ball. It's Friday, April 25th. Coming up on the show, we'll talk about markets, the economy, and of course, some tariffs. So, Molly, Trump won the election in large measure by promising to fix the economy, bringing down inflation, restoring manufacturing. And one of the tools he talked about a lot was tariffs.
How is all this going?
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Chapter 2: What is the current state of the U.S. economy under Trump?
much ballyhooed largest deportation in history. We don't see much sign that migrants have disappeared from the labor force. And on the tariffs, this is the most fascinating thing. There's just not much inflation out there. Now, there's a great big caveat to that, of course, and that is it's early days.
But I still think it's intriguing that for all the talk of tariffs, we're not seeing it in the price data. We're not seeing it in the spending data. So this is definitely a time of frayed nerves, certainly among investors and consumers. But the economy overall kind of looks fine.
You hear this a lot from the White House, right? They're saying that like Wall Street is not the economy. Wall Street isn't Main Street. So why is Wall Street freaking out so much? Is it just the expectation that eventually there will be an economic effect to all of these things?
Or is it actually that for all the sort of noise, the sound and fury coming out of the administration, they just haven't actually done very much? Right.
Well, if you actually take the administration at its word, if you take them both seriously and literally, then there is a very good reason to be worried. Because the scale of the tariffs, number one, the dollar value alone would amount to one of the largest tax increases relative to the size of the economy since the 1960s. So that would definitely weaken the economy.
Secondly, the impulse to prices would deliver a very strong boost to inflation. And finally, it would require a highly disruptive reorganization of supply chains, which would be costly and take years to work through. But, of course, the big question mark is, will the president actually follow through on this? And what we have seen is an interesting kind of, you know, self-correcting mechanism.
The president threatens very aggressive action. The markets sell off. The president walks it back. And now we have a pause on tariffs. We have even talk of the tariffs on China being reduced and so forth. And so the markets improve.
So speaking of tariffs on Chinese imports, which have been set at 145 percent, the Wall Street Journal had some exclusive reporting this week that the White House is considering slashing those tariffs in half to around 50 percent. in a bid to de-escalate the trade war. What could that mean?
It would still be a very big hit to the economy if we had a lasting 50% tariff on China. I mean, our imports from China, a lot of them cannot be easily replaced by goods from other countries. Even if we were to move that production to other countries or to the United States, that's a multi-year process. So it's almost impossible to avoid some impact on prices and consumer spending.
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Chapter 3: How are tariffs affecting inflation and consumer prices?
And you see these headlines of sell America and of the declining dollar, of... The stock market going down like the Dow is headed to have its worst April since 1932. What role have markets played in shaping Trump's policies?
Well, as my colleagues reported this week, we think that the market's role is quite important. The president does seem to be a little less sensitive to the stock market than he was in his first term, but he is still sensitive.
And when the stock market, and in particular the bond market, when they started to show real signs of cracking, that is coincided with when they announced the pause on many of the tariffs.
For those in Trump's inner circle who are a little nervous about the speed and aggressiveness of this tariff action, that provided them with talking points and ammunition to sort of like suggest to the president, hey, Mr. President, maybe it's time to walk this back. There might be a better way.
This has all been very confusing, I feel like, to people on Wall Street because, you know, the IMF meetings are this week. There's a lot of bankers and financial officials from all over the world in town. And they seem very confused that the administration, frankly, is not more sensitive to the markets.
I think there was an expectation that this president viewed the stock market as almost like an approval rating ticker. and would immediately course correct if he saw that there was a negative impact. But instead, he's been sort of intermittently sensitive to market gyrations while claiming that he's not going to be sort of bullied. How much is that uncertainty making people nervous, I guess?
Well, you know, it's kind of like almost a cliche now, but uncertainty is like bad for growth, right? I mean, businesses are just inclined not to do anything. But the longer this uncertainty persists, the more likely that negative effect is likely to manifest itself.
I would say that, as you say, I think that especially leaders from other countries have been struggling to figure out exactly what is it that Trump responds to. Even more so, they're trying to figure out what he wants from them to get rid of the tariffs. We hear this over and over again from countless countries is that they go in, they talk to the president's advisors.
They say, we want to like work with you to negotiate with you. What do you want? And they don't get a clear answer. And so I think it's way too premature to think that the uncertainty is about to go away soon. Because I think that there is still this chasm of mystery about exactly what the United States wants and what the president can ultimately accept from a negotiation.
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Chapter 4: Why is there a disconnect between economic data and consumer confidence?
I don't think we'll have a recession because I think, first of all, you know, one thing I've learned watching the economy over the years is that there's a self-correcting mechanism at work here. And so I kind of think that we'll look back and see that all the chaos—
of the last few weeks was a little bit of a sorting out process where the administration, responding to all the outside feedback it got to its plan, dialed it back and arrived at something that was perhaps a little less disruptive than people originally expected. And for that reason, I think the economy will probably make it through the year without a recession.
All right. Well, we'll have you back on at the end of the year to see how Well, that prediction goes. And see, Molly, people can make predictions. Well, Greg's not a reporter. He's a commentator. Exactly.
And by the way, I just sort of like gave you the consensus forecast, right? I just basically said, well, the consensus is here and I'm just a little bit to the side of the consensus. So it is not exactly a profile in courage if I have to, if I'm being honest.
Greg, thanks so much for coming on.
All right. Thank you.
Thank you, Greg.
Okay. Bye.
So, Molly, before we let you go, we wanted to talk with you about a controversy, another one around the secretary of defense, Pete Hegseth. There's another signal group chat. This one involves his wife and personal lawyers and others. In this chat, Hegseth posted sensitive military information, according to people familiar with the matter.
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