The Daily - Why a Worrisome Economy Doesn’t Seem to Worry Trump

Episode Date: March 21, 2025

As President Trump has rolled out his economic agenda, the assumption has been that he would quickly scale back his most aggressive policies once they began to scare consumers and the financial markets. But that assumption turned out to be wrong.Ben Casselman, who covers economics, and Maggie Haberman, who covers the White House, explain why Mr. Trump’s economic plan may be backfiring and why he doesn’t seem to mind.Guest: Ben Casselman, the chief economics correspondent for The New York Times.Maggie Haberman, a White House correspondent for The New York Times.Background reading: Mr. Trump has said a recession might be worth the cost. Economists disagree.Investors thought they had Mr. Trump figured out. They were wrong.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. Photo: Brandon Bell/Getty Images Unlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify.

From the New York Times, I'm Michael Bobarro. This is The Daily. As President Trump has rolled out his economic agenda, the assumption was that he would quickly scale back his most aggressive policies once they began to scare consumers and the financial markets. That assumption turned out to be wrong. Today, my colleagues, economics reporter Ben Castleman and White House reporter Maggie Haberman on why the Trump economic plan may be backfiring and why Trump doesn't seem to mind. It's Friday, March 21st. Hey Ben. Hi Michael. Good to have you back in the studio. It's been a while. It has been a while. Happy to be here.

As you know, we're two months into the Trump administration and therefore two months into the Trump economy. And he comes to office with a set of sweeping economic promises that the business community and the stock market and polling shows Americans generally are very excited about. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while.

And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while.

And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. And he's going to be here for a while. sweeping economic promises that the business community and the stock market and polling shows Americans generally are very excited about. More prosperity, lower costs, lower regulation, lower taxes. The market booms when he gets elected. Stock market is surging. And then Trump starts to actually put his fingerprints on the economy and the stock market has over the past few weeks been plunging and now the Federal Reserve is telling us that the country's financial outlook is pretty unsteady and Trump himself is now acknowledging that his plans may wreak a certain amount

of havoc on the economy. So a lot has changed very quickly. Yeah, I think that's right. I mean, it's worth winding back a little bit to what Trump inherited in the economy. Because by many measures, it was pretty solid, right? Unemployment was low, job growth was solid, corporate profits were good, right? There were a lot of things that were pretty good. We know there was one really big thing that was not good, right, which was inflation. It had gotten a lot better, but we know cost of living had gone really big thing that was not good, right, which was inflation. It had gotten a lot better, but we know cost of living had gone up and that was in inflation

and it was in housing prices and it was in all sorts of things. And we know that Americans did not feel good about the economy, right? That was a big part of the reason that Trump was brought back to office in the first place. Exactly. So, as you said, when he is elected, there's a surge in optimism among businesses. There's a surge of optimism among many consumers. There was this sense, right, of the economy was actually in pretty good shape according to the economists, and now it was maybe also in good shape according to everybody else.

And yet, in the last few weeks, all of that has turned around. All of that. Markets are way down, consumer confidence is way down, business confidence, crucially, is way down. And so, all of these measures of how consumers, how businesses, how investors feel about the economy have all taken a really sharp turn to the south. Now, that's how people feel. So far, most of the measures of actual activity of what consumers are doing, of what businesses are doing, have not shown that same sharp deterioration.

But the risk, Ben, and I've learned this from you over the years, is that those eroding confidence and sentiment numbers become a self-fulfilling prophecy and they end up dragging down the hard economic numbers you just referred to. Yeah, and I think that's particularly a risk in a situation like this where the drop is so sharp and with a very clear set of reasons. Well, let's talk about those reasons. Let's talk about the mechanics of these confidence numbers falling so precipitously, in my mind there are two major things

that the president has done that have affected the economy, to what degree I don't quite understand. The first being his very aggressive and abrupt efforts to shrink the government, laying off thousands of workers, closing agencies. And the second of course is the tariffs he's imposed on goods imported into the US. Let's start with the cost cutting to the government and how that has affected all the things you

just talked about. So, it has, I think, potential effects in two different ways. One is just the direct effect, right? The layoffs of these workers, cancellation of programs, rescinding of grants, right? All of that is real economic activity that has been pulled back. But the second piece of this is the confidence hit, right? Musk and Trump have cut however many thousands of jobs it is at this point, but there are many more thousands of people who work for government contractors, who work for companies

that sell to the federal government. And you can imagine all of them and all of their employers are feeling pretty uncertain right now. You look at what's happening in higher education. Major universities saying that they're pausing all hiring, right? These are in many cases good, pretty high paying-paying, important jobs that then maybe have ripple effects of lots of other jobs. So this is how cutting government spending or threatening to withhold it starts to really

affect consumer and business sentiment, and in this case, academic sentiment, but their hires as well. It has that potential. Certainly within the sectors that are most directly affected is clearly having a big impact. You can think about it also on these programs, right? If you rely on veterans benefits right now, even if you have not had any difficulty getting your benefits.

The fact that thousands of people who work at the Veterans Affairs Department have just lost their jobs might influence how you feel about those benefits. And there are rumors about what the impact might be on benefits. Absolutely. So these are all things that can have a sort of disruptive effect and that can lead people to pull back, can lead businesses to pull back on hiring. Okay. So that's how the president's approach to cutting the government significantly is impacting the feelings around the economy and in some cases behavior in

the economy. Let's turn to his approach to tariffs and how that helps us understand these problematic numbers that you've been seeing over the past few weeks. Yeah, and in many ways I think this is the big one. The president has imposed sweeping tariffs on many of our trading partners on a huge range of goods. Now some of those tariffs have been paused, they've been delayed, they've been canceled, right?

But at least in theory it can cover a huge amount of goods. And we know from economic research that what happens when you impose tariff, right, there's a tax on imports. What does that do? It raises prices. And, you know, we often sit here, Michael, and we talk about the research says this, but Americans think this. This is one case where Americans seem to have gotten the message from economists because

in all of these surveys, it shows people think prices are going to be higher and they specifically say because of tariffs. And we're seeing that hit in terms of consumers expecting to pay higher prices. We're seeing that in businesses saying they expect to pay higher prices for the materials that go into their goods, and then pass on those prices to consumers.

And we're seeing at least some evidence of it in actual prices. The Federal Reserve just this week came out and said, there's some evidence at least that some of the recent pickup in goods inflation is the result of these tariffs. Which means the tariffs are very quickly having a financial impact. Which is what we would expect from the economic research. And I think that it's important to remember here, Trump ran on a platform of curtailing inflation, even said he would bring down prices.

And crucially, Americans who seem to believe him during the campaign that he would bring down prices or control inflation are now saying, we're getting nervous that this is going to mean higher prices, higher inflation. Well, one reason why this nervousness seems understandable is that the president himself has started to change the way he talks about tariffs. Now he seems to be acknowledging that tariffs can actually really be disruptive to the economy. That's right. We've seen a real shift in messaging from the president himself and from members

of his administration over the past couple of weeks. Trump occasionally would acknowledge on the campaign trail, maybe prices would come up temporarily under tariffs, but for the most part, right, what he was talking about was my policies are going to turn around the economy on day one. Next, I will direct all members of my cabinet to marshal the vast powers at their disposal to defeat what was record inflation and rapidly bring down costs and prices. And he said that even as recently as his inaugural address. The American dream will soon be back

and thriving like never before. But over the last couple of weeks... There's an adjustment. We'll see whether there's pain. ...Spanish members of his administration have started talking about a period of adjustment. — There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing.

— A period of detox, a period of pain. — A period potentially of even recession. — But are you expecting a recession this year? A period of pain. A period potentially of even recession. Are you expecting a recession this year? I hate to predict things like that. Yet he has notably refused to rule out the possibility of a recession, as have members of his administration. And look, economists would say you should never rule out the possibility of a recession.

So that's not inherently unreasonable. But the tone has really shifted here from one of things will turn around on day one to there may be this period of pain, but it will pay off in the long run. And it's worth highlighting here, if this recession happened, it would be specifically because of his policies, right? It would be his tariffs, his uncertainty that's generating the pullback in activity that leads to the recession. That's something presidents often try to avoid even saying the word recession.

And here he's talking about potentially causing one. Right. Is that a moment where we should give him points for candor or be startled by the fact that he's willing to pursue a set of policies that might bring us into a recession, which is never really any president's idea of a good set of policies? So, you know, I asked this question to a lot of economists over the past couple of weeks, and people will say in theory the idea of short-term pain for long-term gain can be reasonable, right? This is harsh medicine, but we need it.

But you better be darn certain of the long-term gain. And what you hear almost universally from basically every economist, every expert is that is not what this is. First of all, there's really no need for this harsh medicine right now. The economy is in basically pretty decent shape. But secondly, this specific medicine, this isn't a harsh medicine, a chemotherapy that will generate a cure. This is bloodletting, right?

This is a medicine that will actually make the problem worse. What makes these economists confident that there won't be a golden era on the other end of this bloodletting, tough medicine pain? Yeah, I mean, I would go further, right? It's not just that they're not certain there would be long-term gain. They're confident that these policies will not yield a long-term gain. Why? Look, anytime we say economists say, right, somebody should shock me, right?

Because economists think many, many different things. This is sort of like- Shock. This is sort of the one thing that economists almost universally agree upon is that tariffs are ultimately a Damaging policy or at least that these kinds of broad-based Tariffs or a damaging policy now there are different reasons for this and this is a complex subject there are a lot of economists who reject the very idea that we need to Reindustrialize the country in some way. They argue that over the decades free trade has left Americans better off on the whole,

that even if it has hurt some people that on average it has been beneficial. I think most economists would make that point, but there's certainly been a lot of rethinking among at least some economists over the past couple of decades about the way that free trade has played out. Again, complicated subject. But I think the thing that there's pretty broad-based agreement about is we can't just turn the clock back. We're not going to make t-shirts in this country again.

We're not going to make commodity-shirts in this country again. We're not going to make commodity furniture in this country. And there are plenty of economists who would say, we should be doing things now to preserve the manufacturing jobs that we do have. And especially in some important sectors, right, in robotics, in AI, in green energy, in chips. These are areas where there may be real advantages to preserving the American manufacturing industry. But broad-based tariffs of the kind that Trump is talking about are just not going to accomplish that. But the president does not seem remotely deterred by what the economists say. He's undeterred, but in a way it's even worse than that, which is that so far he's been

all over the map. We've seen tariffs announced and then they've been delayed. They've been imposed and then they've been paused. In some cases within days, in some cases on the same day, right, within hours. And if you talk to businesses, right, they don't like tariffs. But what they really don't like is having no idea. They don't like uncertainty. They don't like uncertainty. If you're a business right now trying to decide where to buy your goods from, where to locate

your factory, you have no idea what the policy is going to be a week, a month, a year from now. And you could easily imagine businesses just sort of pressing pause and saying, you know what? Let's hold off. Let's see where things are when the dust settles. And that has real economic consequences if they're not hiring, if they're not investing, and the downstream of that, right, so they're not hiring construction workers and they're

not buying materials. All of that is the kind of thing that ripples through an economy and can cause a recession. You're saying the only certainty that has emerged from the first two months of this Trump economic agenda is uncertainty and, to some real degree, pain. And so far, Trump seems okay with that. I think there was an expectation on some level that he would change direction if the markets started to fall, if the economy started to sour, and maybe he will.

But so far, that has not been the reaction from him or from his administration. They seem to be saying, we'll take the pain and Americans are going to have to deal with it. Well, thank you, Ben. We really appreciate it. Thanks so much for having me. After the break, Maggie Haberman on what the growing blowback over the economy has looked like from inside the White House?

We'll be right back. So Maggie, typically when economic data starts to show that a president's agenda is backfiring, the president tries to correct for it. That does not seem to be the case here with President Trump, and you have been trying to understand what that looks like and why it is. So tell us what you found. Beth Dombkowski So I think there are a few reasons for that. He believes in tariffs, not just as an economic tool, but as a good in and of themselves.

As a revenue raiser, as a market corrector. He has been talking about tariffs since the 1980s. He has had this mantra about applying tariffs on countries, quote unquote, ripping us off forever. So that's one. The other is he does see them as a tool. He also thinks that they are a way to impact other countries' behavior and not just economically but across a bunch of sectors.

Fentanyl and Mexico. Correct. But he's also mindful, and we had a lot of conversations with people about this, of not looking like a paper tiger. He does not want to be perceived as an empty suit on this. He knows leaders in Europe and elsewhere are watching what he does on this. And so he does not want to look weak.

All that makes sense. But what Trump is doing now is much, much bigger when it comes to tariffs than what he did in his first term. And as a result, the risk of potential economic costs is much higher than in the first term. So far, it's not just been a wobbly stock market, but rapidly falling consumer confidence, for example. And yet, none of those problematic data points are acting as any kind of a break on it.

At least not so far, Michael. You are absolutely correct that this is a much broader scale of tariffs than what he tried doing in the first term. And I think part of this is because he learned some lessons that may have been the wrong ones from the first term. Explain that. So in term one, he had a group of advisors who were often at odds with each other about economic policy, but he had some really strong anti-tariff voices.

Trump would suggest some version of an expansive tariff, and his anti-tariff economic advisors would strenuously object and push back very aggressively. And Trump would then reverse course and back off of that. Trump's lesson appears to have been things didn't go that badly. The market didn't crash completely. Joe Biden kept some tariffs on in terms of China. My advisors were wrong.

Tariffs are good and I can go bigger this time. But it was a very different economy then. It was a much more thriving economy. It was a pre-coronavirus pandemic economy, among other things. All of which is to say that Trump thinks the real lesson of term one when it comes to tariffs is that he went too small on tariffs and the costs were low. And if he can finally go much bigger on tariffs now in term two, because he's got the right advisors in place, the payoffs will

be much bigger, the costs will remain low, but that feels like a real apples to oranges kind of comparison. It is kind of apples and oranges in a very different economy. Are there people inside the administration saying to the president, look, Mr. President, of course we understand why you want to push for tariffs. We know how central it is to your message and your belief system, but you should know you're not really communicating it quite right and the markets are very anxious about it. Perhaps there's something you can do differently.

There is a clear understanding in the administration that there is some whipsawing going on. So there was this meeting a week ago about how to handle the messaging at the Naval Observatory, which is the vice president's residence. And there was Howard Lutnick, the commerce secretary, Susie Wiles, the White House chief of staff, Jameson Greer, the US trade representative, among others. It was a- Yeah, some big shots. Big shots, very important voices in this discussion.

And as we understand it, it was about dealing with the messaging and explaining to the public what is happening, trying to better explain what the tariffs are, when they might be coming. I haven't seen much evidence that that yielded a change in approach. But its existence suggests that there's an understanding among the president's top aides and economic advisors that there's a problem here. Correct. among the president's top aides and economic advisors that there's a problem here. Right. And they are never really able to say the problem is partly stemming from the top. So it has to be how does the lower tier of people just below him deal with this when

they're talking to television cameras and to reporters as opposed to saying the president is saying things that are complicated and convoluted. And I've watched some of those interviews and it seems worth saying how complicated it has become. orders, as opposed to saying the president is saying things that are complicated and convoluted. Right. And I've watched some of those interviews and it seems worth saying how complicated it has become. I've seen the president's economic advisors go on TV and get asked a question like, can you please help us understand why the president is now saying that this new approach to tariffs

might ultimately bring us into a recession? And the question is basically like, isn't that bad? Don't you not want that? And then the advisor then has to turn around and say, well, it would be into a recession. The question is basically, isn't that bad? Don't you not want that? And then the advisor then has to turn around and say, well, it would be a small recession. But it's a very tough position to put your economic aids in. It's an untenable position. And the two people who are out there the most talking about this tariff program are two financiers, Howard Lutnick, the commerce secretary, and Scott Besant, the treasury secretary.

And so they are describing an economic program that clearly has not been their lifelong economic exposure and project right. And so there are inherent contradictions, as you said, in what they are trying to tell the public they should take from this. And I don't really see that resolving anytime soon. Hmm. You seem to be suggesting that on some level, they might not really believe in this set of policies, but they do have to defend it.

Right. And to be fair to them and to the president, the president's agenda is the agenda. Any administration, this is a president who he is not consistent on a number of things, but he has been very consistent about tariffs for a very long time, long before he became a candidate. And if you're going to serve a president, you should be expected that you're going to be asked to defend their policies. But often, and particularly with Lutnick, the conversation in interviews swings to the president's a genius. He knows exactly what he's doing, which doesn't do much to assuage the markets or concerned voters.

Aaron Powell What does President Trump say or think about the fact that the majority of economists fundamentally disagree with him about the long-term prospects for tariffs? We just talked about this with Ben Castleman. He said that there's pretty clearly a consensus that the short-term pain won't necessarily lead to the long-term gain of reindustrialization across the United States as a result of these tariffs. So what you may end up getting is not just short-term pain, but long-term pain without much gain. LESLIE KENDRICK The president thinks the experts are wrong, which is what the president has thought on

a number of fronts. And again, to be fair to him, he has been shown in very specific circumstances that that has been true. That can be true. It can be true. And maybe his own poll numbers will be impacted to such an extent, his approval numbers will be impacted to such an extent that he changes course, that he takes a dramatic action of some kind. This is definitely a concern for his advisors who are worried about the impact on his political

standing, which at the moment they don't blame on voter response to tariffs and they don't even really blame it on the stock market reaction. They think that the ongoing nature of elevated consumer prices, eggs, so forth, is what is hurting Trump. That may not be the case forever, but Trump so far has not seen anything that has convinced him that he is wrong. And Trump is making, Michael, this enormous gamble. It really is.

Yes. On his economic policy and on the idea that everybody else is wrong. And Trump makes these massive gambles. Sometimes they really don't work out for him. Sometimes they do. And he takes those moments as affirmation that he was correct all along. Is it right to think Donald Trump is kind of gambling his second term on tariffs? To some extent. I don't think the entirety of it, but certainly the short-term

economic picture and possibly the long-term, he is waging an enormous bet that his view of the economy is going to be correct in the face, to your point, of almost everyone's expert opinion as to why this approach is risky. So this has been very confusing for people to figure out what exactly the end game is. Well, the end game one might presume, and you've hinted at this, is that the polls are pretty important to Donald Trump. He's never seemed to have a long-term stomach for unpopularity. And everything you've said here suggests that he might be able to disregard the markets for a while and the views of Wall Street.

He doesn't need reelection and he fundamentally believes in tariffs and has for a very long time and thinks he didn't get a shot to do it as big as he wished in the first term. So he's going to do it in this term. But if in a year, year and a half, two years, we're looking at polling that shows that the majority of Americans think he's mishandling the economy and prices are up and the long-term gain isn't arrived but the short-term pain is very present, don't we expect that he would change his approach to these tariffs? Or as the answer, no, not at all, because he really thinks that the only way to prove the experts wrong is to remain committed to it.

So, Michael, I think that there will be competing impulses at play in Donald Trump's head as he is grappling with this. On the one hand, he is going to want to stick to his guns. This is something I think he does believe in. And I think he's going to want to show the experts that he's right. On the other, there is an external reality, which is that he is not on the ballot again, but his party is. Mm-hmm.

In the next midterm. In the next midterms. And the Republicans have a very, very narrow majority in the House. Trump and his advisors are extremely aware that if they lose the midterms, the number of investigations and subpoenas that they will face from a Democratic House will be vast. And that's not something they want to spend the final two years of his term dealing with.

Right. And nothing can cost an incumbent president control of Congress more than a problematic economy, high prices. And appearing to seem as if you don't hear voters' concerns about them. Right. So Trump might be willing to gamble on the country's future economically, but I think he's far less willing to gamble

with his own political fortunes. Well, Maggie, thank you very much. Michael, thank you. We'll be right back. Here's what else you need to know today. Today we take a very historic action that was 45 years in the making. In a few moments I will sign an executive order to begin eliminating the federal Department of Education once and for all. On Thursday, President Trump signed an executive order instructing his education secretary

to begin dismantling the Department of Education. And it sounds strange, doesn't it? Department of Education, we're going to eliminate it and everybody knows it's right. And the Democrats... Because the department was created by an act of Congress, it cannot be shut down without congressional action, something Trump called for on Thursday night. For now, the department will continue to carry out functions required by law, such as administering federal student aid and funding for special education.

And, The Times reports that Elon Musk's already enormous access and influence within the federal government are set to expand later today when he is briefed on the US military's plans for any future war with China. That briefing will likely highlight Musk's many conflicts of interest since he runs multiple businesses that hold government contracts, including with the Department of Defense. Today's episode was produced by Mary Wilson, Will Reed, and Rachelle Bonja. It was edited by Mark George and Chris Haxel, contains original music by Marian Lozano and

Dan Powell, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Lansferk of Wonderly. That's it for the Daily. I'm Michael Bobaro. See you on Monday.