Trump cannot defy the market

"I am always right. We will enjoy prosperity."

During a White House press conference on the 11th (local time), U.S. President Donald Trump responded to concerns about an economic downturn caused by his high-tariff policies with this assertion. However, considering that the press conference took place right after the New York stock market experienced extreme panic—marked by a 4% plunge in the Nasdaq on the 10th—Trump’s certainty was hard to accept. Instead, his earlier remark about a "transition" may have been closer to the truth. In an interview with Fox News, a media outlet known for its pro-Trump stance, he was asked whether he expected a recession this year. He replied, "There is always a transition period. What we are trying to do is a great endeavor to restore America’s wealth, and that takes time." Investors interpreted this as an implicit admission of the negative impact of high tariffs, leading to a market-wide bet on economic decline.

The actual state of the U.S. economy presents mixed signals. Among these, the consumer sector is showing a clear downward trend. According to the Department of Commerce, personal consumption expenditures (PCE) in January declined by 0.2% from the previous month, marking the steepest drop since February 2021 (-0.6%) during the pandemic. In the production sector, the February Manufacturing Purchasing Managers' Index (PMI) fell 0.6 points from the previous month (50.9), indicating a slowdown in manufacturing activity. However, inflation, the primary concern regarding high tariffs, remains stable. The February Consumer Price Index (CPI) rose only 2.8% year-over-year, falling short of market expectations. The employment sector also showed resilience, with non-farm payrolls increasing by 151,000 in February, up from 125,000 in January. Although the unemployment rate increased to 4.1% from the previous month, it remains relatively stable.

Ultimately, while consumption and production are contracting in the U.S., inflation and employment are holding steady, making economic sentiment a decisive factor. The problem is that Trump’s tariff policies are inconsistent, fueling uncertainty. Canadian Foreign Minister Mélanie Joly even lamented, "We cannot go through this 'psychodrama' every 30 days."

In economics, uncertainty triggers anxiety among consumers and businesses, dampening spending and investment. A prime example is the 2008 global financial crisis, where fears over subprime mortgage investments led to a bank run, triggering a recession. In this regard, the February U.S. Consumer Confidence Index plunged seven points from the previous month, marking the sharpest drop since August 2021—a troubling sign.

Throughout history, no ruling power has ever triumphed over the market. If Trump seeks to build America’s wealth through tariffs—a form of taxation—he should reflect on Adam Smith’s words in The Wealth of Nations (1776): "Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice. All governments which thwart this natural course are oppressive and tyrannical."