Since he started his second term as President of the United States, Trump has been using tariffs a lot. He’s targeting big trading partners, like China and the European Union, and has even threatened countries like India. These tariffs seem to come and go on a whim, more harmful to businesses than helpful. Economists are trying to figure out what Trump is really up to. They think these chaotic policies might weaken the US dollar, making American products cheaper for other countries. When Trump became president, the dollar got stronger, but now it’s falling again.
Trump might feel confident because the US economy bounced back quickly after the pandemic. Despite high inflation, aggressive interest rate hikes, and global tensions, the economy has been doing well. However, making sudden changes can scare consumers, leading to serious problems. If people lose confidence, it can be hard to get it back.
For example, Japan raised their interest rates suddenly back in 1989, which caused a long economic struggle lasting decades. Even with low interest rates, people didn’t feel secure spending money.
A similar situation is happening in China, where tough rules on real estate borrowing made consumers feel very negative, and no amount of government help has changed that.
In the US, people felt good because of the AI boom, but recent disruptions have brought worries back. Sudden policy changes may hurt consumer confidence even more, leading to big problems in the economy.
Ananya Roy is the founder of Credibull Capital, a registered investment adviser. You can find her on X: @ananyaroycfa. Views are personal and do not represent the stand of this publication.
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