Trump says the economy is in 'transition.' What comes after?
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On the campaign trail back in 2024, then-candidate Donald Trump made big promises for the economy. The next Trump economic boom will begin on November 5th, 2024. It's going to be a boom like no other. And he had a special message to investors. You better hope I win because otherwise you're going to be in 1929 territory in my opinion. Trump rode that economic message to a decisive victory in November and...

On the heels of that victory, there were in fact some positive signs in the stock market. Maybe not a boom, but certainly a big bump. The Dow Jones Industrial S&P 500 and Nasdaq composites all closed at record highs the day after the election. The market's gone through the roof. Enthusiasm's doubled. It's doubled in the last short while.

And I watched a liberal commentator say, you know, whether you like him or not, there seems to be a beautiful light shining over our country and even over the world. Fast forward to this week, and that beautiful light seems to have dimmed.

The S&P 500 closed in correction territory Thursday, down 10 percent from its recent high. As we record, it has bounced back some, but it still looks like a fourth straight losing week. And Trump has struck a different tone. Here he is on Fox News last weekend. Are you expecting a recession this year?

I hate to predict things like that. 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. Consider this. Trump says we can expect a little disturbance in the economy, but he promises his tariff strategy will remake the American economy for the better. Will it? From NPR, I'm Elsa Chang.

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It's Consider This from NPR. A little disturbance. A period of transition. A detox period. These are all phrases that President Trump and his administration have used to describe the economy as the stock market has plunged in response to an onslaught of tariffs. But President Trump is adamant that his tariffs will ultimately bring revenue, jobs, and factories to the U.S.,

So the question is, is this short-term pain in exchange for long-term gain? Or are these just the early signs of a recession?

To help us answer that question, we're joined now by economist Matt Slaughter. He's the dean at the Tuck School of Business at Dartmouth. Welcome. Thank you. Pleasure to be here. Pleasure to have you. So can you just first try to spell out what is President Trump's explanation, as you understand it, for what is happening in the economy right now? And where does he say the economy is headed? Sure. I think the metaphor of short-term pain is the president articulating that

his attempt to try to restructure the American economy will generate costs and disruptions in the short term. I think what's being missed, however, is that the more accurate forecast is that what the United States is setting itself up for is not just short-term pain, but long-term pain as well. Well, I was just going to ask you because President Trump is trying to assure people that any disturbance that's felt right now is only temporary. Is it only temporary? It sounds like you don't think it is temporary.

It is unlikely to be temporary. The breadth and depth of the tariffs that are being imposed and the possible additional policies that might restrict international investment and immigration, those are going to damage the United States, not just in the short term, but in the long term as well. I think...

A fundamental reason that President Trump was elected and then reelected was his astute understanding that globalization has not benefited every single worker and company and community. But what is being missed is

is that for decades, all those connections to the global economy through trade and investment and immigration have really spurred gains for scores of millions of Americans. Well, one specific goal that Trump has mentioned is that he wants to rebuild U.S. manufacturing. Do you think his tariff plan can ultimately truly accomplish that?

I worry that it won't. If you look at the data, the strongest companies in the United States in manufacturing and in services as well, they tend to be the globally connected companies, the ones that through importing intermediate inputs and exporting their products to the rest of the world, and those tend to be the more productive, the more innovative companies, and the ones that ultimately end up paying higher wages and generating better jobs, which is rightly what the president is focusing on. But is there an argument to be made that these tariffs can still help

A little bit. Like the head of the United Auto Workers, Sean Fain, who's been a big critic of Donald Trump, he's actually come out in favor of these tariffs. Like here he is on ABC's This Week. Tariffs are an attempt to stop the bleeding from the hemorrhaging of jobs in America for the last 33 years. Is Fain wrong to think that these higher tariffs work?

will help the U.S. autoworkers whom he represents? No, he's not necessarily wrong that autoworkers in particular parts of the auto industry may benefit from higher tariffs that limit the competition that certain companies face from imports coming in from the rest of the world.

But what's essential in understanding the overall U.S. economy is the kinds of tariffs that are being imposed almost always generate greater harm in other companies. So, for example, in recent days, the United States has dramatically escalated our tariffs on imports of steel and aluminum. Well, the data show very clearly there's somewhere between 30 to 50 jobs in steel using industries in America for every job there is in a steel-producing industry.

And so the aggregate impact on U.S. manufacturing tends to be quite harmful. You mentioned tariffs on steel, which brings me to this.

the issue of national security, because the Trump administration has also said that tariffs are very important for national security. Like Commerce Secretary Howard Letnick said, you can't be at war and not make steel. So I suppose the argument is tariffs designed to protect, say, the U.S. steel industry are important. Does he have a point there when it comes to national security? Yes, he does. Of course, national security is essential and matters more than dollars and cents of economics.

And of course, we should have checks on global commerce to protect truly essential defense technologies and products. But essential to national security is economic competitiveness. And again, economic competitiveness overall for America is strengthened, not harmed, by these global connections such as international trade. And we should note, like, the president did not rule out a possible recession. Do you think a recession is likely? Yeah.

It's getting more likely by the day. The wider and broader and higher these tariff barriers go up, the more likely it is that businesses in America are going to suffer losses and profits. They're going to be less productive. There's going to be jobs lost.

It is very clear that American consumers, smartly and rightly, are recognizing the likelihood that the prices that they pay for goods and services are going to go up. Matthew Slaughter is an economist and the dean at the Tuck School of Business at Dartmouth. Thank you very much for your time today. Thank you. This episode was produced by Michael Levitt and edited by Connor Donovan and Nadia Lancey. Our executive producer is Sammy Yenigan.

And before we go, a quick thank you to our Consider This Plus listeners who support this show. Your contribution makes it possible for NPR journalists all around the world to do their jobs. Supporters also get to hear every episode in even less time with no sponsor messages. Learn more at plus.npr.org. ♪

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