Shipping containers are stacked at a port on May 2, 2025 in Los Angeles. Ports across the United States are already beginning to see the impacts amid the ongoing trade war. Credit: Associated Press
Economy
Trump’s Perfect Storm that Could Sink the American Economy
It’s not just the president’s trade-destroying tariffs, erratic shifts in policy, and fiscal recklessness. Look at the rule of law—or lack thereof.
By Robert J. Shapiro May 5, 2025
Donald Trump has steered the American economy into a perfect storm. In the book, film, and now in real life, a rare combination of destructive forces comes together and magnifies the damage. This storm could break the U.S. economy. Trump’s tariffs are the most destructive force. Their first-order damages begin by arbitrarily driving up the prices of every product and input we import, followed by price hikes on most competing products and inputs made here. This will leave less money for everything else, depressing growth and jobs even as inflation accelerates—a textbook definition of stagflation. And these first-order costs are compounded by retaliatory tariffs by the primary targets of Trump’s levies, further slowing jobs, wages, and growth.
Six months ago, our economy grew at a healthy 2.8 percent rate, and inflation had eased sharply. Now, Trump’s policies have ushered in rising prices and the first stage of a recession.
His program’s second-order costs follow from the unprecedentedly high tariffs on goods and inputs from our three largest trading partners. The 145 percent tariffs on all Chinese imports and China’s 125 percent retaliatory tariffs have established for now a mutual embargo between the world’s two most important economies, alongside Trump’s 25 percent tariffs on most goods and inputs our companies buy from suppliers in Mexico and Canada.
