_WHAT’S HAPPENING_
The Dow Jones Industrial Average has dropped precipitously over the last week, losing around 10 percent of its value amid President Donald Trump’s trade wars. But the president seems unconcerned, as he is determined to reset America’s economy and re-industrialize the country.
While Wall Street was generally happy with Trump during his first term, the president is now leaning hard into protectionist economic policies — in conjunction with an unpredictable negotiation style — that is causing traders to sweat. Often touting the impressive stock market in his first presidency, Trump is now prioritizing American industry during a “period of transition,” which he says may cause some short-term pain.
_THE FACTS_
The Friday before President Trump’s inauguration, the Dow Jones Industrial Average — typically used as an indicator for the entire stock market — stood at just under 43,500. A few weeks later, it was nearly at 45,000, almost its highest point ever. But now it has tumbled: markets will open today with it standing at around 40,800.
The markets began their sell-off due to President Trump’s trade war with Canada, Mexico, China, and the European Union, amid fears that the tariffs could trigger a recession.
President Trump dismissed Wall Street’s concerns, saying that the sell-off was driven by “globalists that see how rich our country’s going to be, and they don’t like it.”
In Trump’s first term, he removed elements of Dodd-Frank banking regulations and deregulated the economy more generally, boosting the stock market and pleasing Wall Street. Now, he has turned to a more populist approach.
For example, Trump’s pick to lead the Department of Justice’s antitrust division, Gail Slater, is a fierce advocate of antitrust enforcement.
Treasury Secretary Scott Bessent recently said, “Access to cheap goods is not the essence of the American Dream.”
Trump also refused to rule out the idea that his tariffs could cause a recession, saying there would be “a period of transition.”
Newsweek opinion editor Batya Ungar-Sargon pointed out in Compact Magazine that all of this is in line with Trump’s plan to reorient America’s economy away from finance and hedge funds to industrialization.
_INSIGHTS_
As some observers have discussed, economic turbulence early in one’s presidency does not necessarily spell doom: Ronald Reagan looked as if he would lose re-election in 1982, but by 1984, the economy was booming. While Trump does not need to worry about re-election, he does want a like-minded successor to follow him into the White House.
However, part of the problem for Wall Street and the financial markets is President Trump’s unpredictability in how he has waged his trade war. Trump has repeatedly walked back or dropped tariff threats at the last moment, causing volatility for those who participate in international trade.
Trump’s opponents have seized the current market turbulence to accuse him of purposely causing a recession. Though he recognizes his policies may cause short-term pain, the American voter may not be prepared to accept a market slump in exchange for the president’s promised long-term gain.
