The Trump downturn: Trouble ahead for the US economy

The Trump downturn: Trouble ahead for the US economy Warning signs are flashing brightly , suggesting that a downturn in the U.S. economy is likely in the next year. If it comes, President Trump has certainly earned his share of the blame — though not for the reasons many suggest. His tariffs are not the core problem. Instead, chaos and lack of commitment to clear, stated economic priorities pose a much bigger challenge. There are indeed trouble signs. Consumers have been carrying the economy lately, with consumer purchasing responsible for essentially all GDP growth in the second quarter of 2019. Yes, there was a small increase in government spending. But it was more than offset by problems in the other two major components of GDP — private investment ( which declined ) and the U.S. goods trade deficit ( which keeps rising ). Notably, consumer sentiment plunged in August, recording its largest monthly decline since December 2012 . Some attribute these challenges to the Trump tariffs — and “rising tariffs” were indeed cited by one-third of participants in a recent economic survey . But economist Paul Krugman has noted that “protectionism” gets an “excessively bad rap.” Krugman explains that even high tariffs don’t always cause unemployment since they can be offset by gains in import-competing industries. It’s important to note the implication of what Krugman is saying here. Yes, tariffs can make the economy slightly less efficient. But overall employment may be largely unaffected. It’s also true that farmers […]

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