For a few days late last month the bearers of the conventional wisdom briefly became self-aware enough to ask themselves: What if they gave a trade war and nobody came?
“Donald Trump reaps $50bn tariff haul as world ‘chickens out,’” was the headline in the Financial Times. “Trump trade deals prove access to the U.S. still matters above all else,” read a similar headline in Axios. The top Obama economist Jason Furman wrote in the New York Times that the sky hadn’t fallen after “Liberation Day” and admitted economists suffer from their own unique strain of TDS: “tariff derangement syndrome.”
“They’re not the only thing in the world,” Furman later said of tariffs in an interview on PBS. “They’re not necessarily even the worst thing in the world. And so, when we hear them, we get sort of worked up and probably sometimes make them sound even worse than they are.” Though he added, “But don’t get me wrong, they’re still not good.”
All this came as the stock markets largely made peace with even the uncertainty around the Trump tariffs and the economy grew 3 percent in the second quarter of 2025. Fewer experts now forecast a recession this year.
Then came the report that the economy added only 73,000 jobs in July, the substantial downward revision of the May and June jobs numbers, and Trump’s decision to shoot the messenger in Trumpian fashion by firing the head of the Bureau of Labor Statistics. (There are some problems with the data, even if the numbers aren’t thoroughly politicized.)
Whatever reappraisal of Trump’s trade policies was underway disappeared almost as quickly as it came. “Crash the economy” was back with a vengeance. Even as economists like Furman concede they let tariffs drive them a bit crazy, they warn there are signs of stagflation.
The full story is more complicated. Trump is broadly right on the question of how much leverage the need for foreign access to U.S. markets gives him. Only China, because it is a geopolitical rival with its own huge market, and Canada, which fears subordination to the United States, have retaliated against Trump’s tariffs.
“President Trump’s tariff threats have turned into a play for cold, hard cash as he tries to leverage U.S. economic power to cajole other nations to make multibillion-dollar investments in order to maintain access to America’s market,” the New York Times reported this week. “The president’s second-term trade agenda has clear echoes of his ‘Art of the Deal’ approach, essentially demanding that trading partners show him the money in the form of investment pledges or else face astronomically high tariffs.”
But the public is tired of high prices. Inflation is down, but not quite to acceptable levels, and it is cumulative. The cost of living remains high, to the detriment of incumbents in much of the world.
Tariffs are not strictly speaking inflationary—they are a tax. But they do make certain things more expensive and they give the public reason to blame Trump for higher prices, whether or not the tariffs are directly involved in any particular case.
High prices overwhelmed every other, more positive economic metric while Joe Biden was president, leading to Trump’s return to the White House. (Though some of those other metrics were weaker than Biden and his media allies were maintaining.)
Can Trump keep enough of the public behind him long enough for investments to flow to the U.S. under the new tariff regime? Consumers, and even American businesses dependent on imported raw materials, could be uneasy as the tariffs bite.
From Trump’s vantage point, many critical countries are paying tariff rates far below what he had originally proposed, the tax cuts have been extended and made permanent, employment is up even as 1 million foreigners have left the workforce, and jobless claims have held steady. No stagflation yet, and there’s still Federal Reserve Chairman Jerome Powell to kick around—for now.
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But Trump has fewer media allies than Biden, whose numbers on the economy tanked anyway, and investors become Panicans when the president starts firing or threatening to fire the bigshots at BLS and the Fed. Nobody knows what tomorrow will bring.
It’s all in the cost of doing business.
