Is Trump's Economy Taking Shape?

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I'm Sarah McCammon. I cover politics.
I'm Danielle Kurtzleben. I cover the White House.
Today on the show, we're looking at the economy, what President Trump says he wants to achieve, and whether or not that economy is starting to take shape. So a longtime friend of the pod is here, NPR's chief economics correspondent, Scott Horsley.
Hey, Scott. Great to be with y'all.
So Danielle, the economy, as we both know, was a major theme of the presidential campaign. We heard about it again and again from voters on the campaign trail last year.
Just remind us, what was Trump's economic message when he was running? I would put three big bullet points at the top of Trump's economic message. One is not really a policy so much as just a thing he said, which is Bidenomics has failed.
Your life is bad because of Joe Biden, especially inflation. Inflation is high under Joe Biden.
I will bring it down. So that was one part.
Another was I'm going to cut taxes. I'm going to put more money in your pocket.
That means broad tax cuts, but also a few piecemeal tax cuts. No tax on tips, no tax on Social Security, no tax on overtime.
That is how I am going to help you personally. One other thing, of course, was tariffs.
He said over and over, tariffs is the most beautiful word in the dictionary. I love it.
I love it. I love it.
He said he would use tariffs for all sorts of things as well, to bring in revenue, possibly by doing that, eliminate the income tax. He floated that at one point, but also to help boost manufacturing via tariffs and just use them as a bargaining chip.
So we'll get into those, but those are the three big ones that come to mind for me. I mean, you touched on a few policy ideas there in addition to just messaging, but so far, which of those policies does he seem to be prioritizing? Well, he is still blaming Joe Biden for inflation, but that is not a policy.
That is, again, just a message. We haven't gotten to tax cuts yet.
House Republicans did just put out a plan that pretty ambitiously aims to cut up to $4.5 trillion in taxes. That's a lot.
We'll see how far that legislative agenda goes. But then there's tariffs.
And there, we've talked a lot about tariffs, but has he put many into practice?

No.

It's a wait-and-see game on tariffs.

For example, but has he put many into practice? No. It's a wait and see game on tariffs.
For example, he has imposed some tariffs on China, some 10% tariffs. He did just sign an order for tariffs on steel and aluminum, 25% tariffs.
Those will not go into effect for a couple of weeks yet. There were also those tariffs he threatened to impose on Canada and Mexico, but he ended up punting those a month out.
He's also talked about what he calls reciprocal tariffs. The basic idea seems to be that the United States would impose tariffs on other countries equal to whatever tariffs they impose on the U.S.
And Scott, as Danielle just mentioned, Trump blamed Biden for problems in the economy, especially inflation. We heard so much about that.
But just a little bit of a reality check. I mean, big picture, what was the economy that Trump inherited? How strong was it? Donald Trump inherited a pretty good economy from Joe Biden.
Inflation did go very high back in 2022, but it's come down a lot. It's still higher than we'd like.
We just got inflation data last week that showed prices in January were up 3% from a year ago, which is a little more than most of us would like. The Federal Reserve likes to see inflation around 2%, but it's a far cry from the 9 plus percent we saw back in the summer of 2022.
So inflation has cooled a lot. The job market's done very well.
We've added millions of jobs. Unemployment is quite low.
It's around 4%. And a lot of people thought we were going to have to go into a recession in order to get inflation under control.
We've got inflation largely, although not totally under control, without a recession, with a very strong job market, with low unemployment. GDP is growing at a healthy clip.
So all in all, pretty good economy.

It is interesting. We've talked in the past about how people tend to see the economy through the

partisan lens. And in most of 2024, in the run-up to the election, it was generally Republicans who

were more down on the economy than Democrats. That flipped right after Donald Trump got elected, and now it's Democrats who were more down on the economy than Republicans.
It's kind of a mirror image if you look at what was before and after the election. And we've seen that in the past where any time control of the White House changes, the people whose party is in power tends to feel like the economy is doing better and the people who are out of power feel like the economy is doing a little bit worse.
Yeah, and another thing we've talked about a lot, Scott, is the disconnect sometimes between some of those strong economic indicators that may cause economists and people who write business news to say, well, the economy is strong and the lived experience of people's lives who are many times working paycheck to paycheck and facing high prices. For example, the price of eggs was such a huge talking point in the campaign.
That's a continuing challenge with bird flu and whatnot. So I guess even if the greater economy is relatively good and people aren't feeling it in their personal economy.
How long can Trump continue to blame Biden for some of these problems if they persist or maybe even get worse? Greg Ip of the Wall Street Journal had a column last week where he said, you know, inflation helped to elect Donald Trump. Now it's his problem.
So going forward, Donald Trump is going to own this economy, even though some of the things that we're going to see will maybe be after effects of policies that were put in place during the Biden administration. It's Donald Trump's economy now.
And at some point, people will start to hold him accountable, even though, as we've said many times on this podcast, the presidents have limited control over the economy. There are certainly policies they can put in place that can move the needle one way or the other, but lots of things happen that are beyond the president's control.
It is true that there was kind of a disconnect in the run-up to the election between economists and economic reporters like me who kept saying, look, inflation's come down, inflation's come way down, and folks at the supermarket who said, well, my grocery bill is still high. And that hasn't changed.
Grocery bills are still high. And they're probably not going to come down very much, if at all.
What will happen over time is that wages will catch up and people will be gaining ground. And in fact, wages have been outpacing inflation now for the better part of two years.
But there's still sort of a cumulative hangover from the high inflation we had a few years ago. And you mentioned eggs, which are still a real sore point.
Egg prices jumped more than 15% just between December and January. So that's a real challenge.
I would agree with everything Scott said. People's feelings about the economy, yes, they are based on their own personal data in their daily lives, but it also is to some degree dependent upon what they hear, what they see in the news.
And should Democrats find problems in the economy, for example, point to egg prices, point to whatever other problems happen to materialize and say this is Donald Trump's fault, then that could cause people to hold Trump more responsible. Republicans were incredible at this when Joe Biden was in the White House.
So should Democrats be able to mount that kind of a messaging challenge to Trump? That is one thing. All right, well, it's time for a quick break.
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You know, Scott, you mentioned a moment ago that eventually Trump will have to own his economy. You also mentioned that there's just so much a president can actually do.
So I want to talk about that. What can the president do when it comes to adjusting the economy? Well, the president didn't put forward a whole lot of proposals to actually address inflation.
The big thing he talked about was to increase drilling for oil and natural gas and to try to bring down gasoline prices.

Of course, oil production in the U.S. is already at near record high, so it's not clear how much additional room there is there to bring down the price of gasoline and the price of diesel and everything gets struck around.
That was really Trump's main policy prescription for dealing with inflation. The other thing that Danielle's touched on is his tariff proposals, which have the potential to move the needle in the other direction.

That is... policy prescription for dealing with inflation.
The other thing that Danielle's touched on is his tariff proposals, which have the potential to move the needle in the other direction, that is raising prices for Americans. He's called for a 25% tariff on all imported steel and aluminum.
Well, for Joe Sixpack, that's probably going to mean higher prices for beer and soft drinks that comes in aluminum cans. That's not going to be helpful when it comes to lowering prices.
I mean, that's what history would tell us, right? Yeah. And also just logic, the way that tariffs work.
Tariffs, again, work differently than how Trump frames it. Trump has often said that other countries pay tariffs.
That is not true. American companies that import goods pay tariffs to the U.S.
government. That is how it works.
So if those American companies are importing goods and paying those taxes, who is going to end up paying for them? Well, in large part, consumers, because those companies need to cover that cost somehow. So people's wallets do.
You know, aside from tariffs, major economic policy requires Congress. It needs congressional approval.
Trump will have to work with Democrats to get things done on this front. Republicans have such a narrow majority in Congress.
Is there a world where they can work together? Maybe. I do want to add one thing about that question you just asked.
You said aside from tariffs, major economic policy needs congressional approval. Generally true.
But also Congress does have the power to pass tariffs. Normally they would, but Donald Trump, this is another feature of his last presidency, and now this one, is him claiming different laws.
You'll hear us talk about Section 232, Section 301, et cetera. He claims that the authority of various different laws, that it's a national emergency, that there's national security reasons.
Therefore, I, President Trump, am going to impose these tariffs. So Congress could, in fact, do this themselves or not do this themselves.
But he has decided he's going to do it. And thus far, he hasn't gotten much pushback.
At any rate, let's leave that to the side. Is there a world where Democrats work with Trump? I mean, to me, it depends on the policy and it depends on what Trump keeps doing.
It depends on Democrats figuring out their strategy. Think back to Trump's first term.
A whole bunch of Democrats voted for the USMCA, that renegotiation of NAFTA. So they have shown themselves willing to go along with certain kinds of policy.
But it also depends on what Democrats decide to do next, how they decide to strategize against Donald Trump. A lot of them would tell you that Donald Trump has been flouting the Constitution in this first month of his presidency, and Democrats might not be as happy to go along with any sort of Trump policy, depending on what he keeps doing, depending on what they decide is a winning strategy for them.
And the first test of this, or one of the first big tests we'll see of this, is in March 14th, which is when... Budget deadline.
Yes, absolutely. So do Democrats decide to risk a shutdown? Maybe, maybe not.
You know, Scott, we started out this podcast talking about a lot of numbers. And I'm curious, which ones will you be watching in the months to come? What economic indicators are going to be the most important? I'm certainly going to watch what happens with inflation.
Does it continue to normalize back to around 2% or does it get kind of stuck in this low 3% range where it's been? Does it even go up higher than that? I'm going to watch what happens with interest rates, in particular, longer-term interest rates like mortgage rates, which have actually gone up since the election in the expectation of bigger federal deficits and more borrowing by the federal government. That makes it harder for people to buy a house or to finance other long-term projects.
I'm going to continue to watch the job market, hope that we continue to add jobs so that folks who've been on the sidelines can go to work and pay the bills and be productive. And I'm going to watch what happens with consumer spending because, of course, consumer spending is the main driver of the economic engine in this country.
We saw a little bit of a hiccup in January where Americans tightened their belts a little bit. That often happens after the holidays, but it happened pretty significantly this year.
We'll see if that continues, if people continue to spend, keep the economic gears turning, or if they really keep a tight grip on their wallets and maybe slow the economy down. And what the White House says about all of it.
Absolutely. All right, Scott Horsley, thanks so much for being with us.
Great to be with y'all. That's all from us today.
I'm Sarah McCammon. I cover politics.
I'm Danielle Kurtzleben. I cover the White House.
And thank you for listening to the NPR Politics Podcast. This is Tanya Mosley, co-host of Fresh Air.
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