Donald Trump’s Economic Anxiety

The president can scarcely afford to continue the trade war, but he can scarcely afford to end it either.

Jonathan Ernst / Reuters

As the political world struggled to understand the 2016 election, one common (and commonly derided) explanation was that “economic anxiety” among some voters, especially white working-class ones, had helped propel Donald Trump to victory. It finds an ironic echo this week, as the president displays his own economic anxiety—a fear that a recession might turn him out of office.

Trump’s anxiety has manifested itself in a string of fevered tweets and policy trial balloons over the past few days. The president has bashed the Federal Reserve, blamed the press, floated tax cuts, and delayed a tariff, even as he insists, paradoxically, that the American economy is strong. It’s not clear how likely a recession is or how it would affect his political prospects, but Trump has made clear that he is worried about both.

Recessions are a fact of life, and economists have warned for some time that the United States is due for one sooner rather than later. Recently, however, there have been new signs for concern, including the summer’s buzziest pundit phrase—the inversion of the yield curve, which has often indicated recessions in the past. This doesn’t guarantee that the economy will enter a recession or say when it might do so, but it’s been enough to rattle Trump.

On Monday, the president said the Federal Reserve should drop interest rates a full point, in addition to a quarter-point cut in July. The Washington Post reported Monday that the administration is considering trying to cut payroll taxes, a move to stimulate the economy that the Obama administration used in 2011 and 2012. (That would require Congress’s say-so.) Last week, Trump claimed that the media were trying to manufacture a recession. (The press doesn’t actually have that power and, even if it did, seems highly unlikely to use it given how vulnerable the already battered news industry would be in a new recession.) On Monday, Trump added that Democrats are rooting for a recession so that they can win the presidency.

That accusation, though unfounded, cuts straight to Trump’s fears. No president wants to see the economy shrink on his watch, since that’s often lethal both to legacies and to reelection prospects, but it’s an especially pointed fear for Trump, who ran for office arguing that with his business experience, he was especially well suited to running the economy. He derided the Obama administration as a bunch of amateurs who didn’t understand numbers or know how to negotiate, and he promised that, under his leadership, there would be 4 percent annual growth, and that he’d create 25 million new jobs.

Two and a half years into his term, economic growth hasn’t reached 4 percent in a single quarter, and about 6 million new jobs have been created, which is well short of what he promised and even short of growth under Barack Obama. These shortfalls aren’t necessarily Trump’s fault: As many in the press, including me, pointed out during the 2016 campaign, presidents have relatively little control over the economy. But Trump made outlandishly unrealistic promises, and voters may hold him to account for them.

A president does have a few levers to move the economy, however, and Trump’s decisions on that front have been dubious. The president pushed through a large tax cut in December 2017, his greatest legislative achievement, and while that likely did stimulate the economy, it proved a political flop and did not prevent the current turmoil.

One reason for the muted success of the cuts is that Trump is also working another of his levers at cross-purposes. The president does have a remarkable amount of control over trade policy, and by installing a series of tariffs and sparking a trade war with China, Trump has put a hobble on the economy. Despite what his aides insist, the costs of tariffs are borne by Americans, and while some of his punitive measures hurt other countries, including China, there’s no good way to prevent global economic stress from washing back onto American shores.

Trump could, of course, reverse course on the tariffs and sue for peace in the trade war. He’s already delayed a tariff on some electronics and clothing imported from China until after the Christmas shopping season. But backing down from the aggressive trade stance would pose problems of its own. Doing so would be turning his back not only on another of his core promises from 2016, but also on decades of conviction about the importance of a protectionist approach to China and trade more broadly. Trump can’t afford to continue the trade war, but he can scarcely afford to end it either.

As Trump calls on the Fed to cut interest rates, he has repeatedly assailed Chairman Jay Powell, implying that Powell is part of a conspiracy against him. But here again is an example of where Trump has used one of the few levers he has on the economy—and has hurt himself. Trump picked Powell for the role. Ironically, Janet Yellen, the Fed chair he effectively fired, would likely have been more dovish on interest rates, but she was an Obama appointee, and that was enough to turn Trump against her.

It’s easy to see why the economic jitters would rattle Trump. While the chattering classes can occasionally get the president’s goat, he’s long since realized he won’t win them over. But his campaign strategy relies, almost exclusively, on appeals to his base, which he views as everyday Americans in the heartland. There are a couple of ironies here. One is that just how a recession would affect the reelection campaign is a little opaque. As Thomas Edsall recently wrote, it’s possible that an improving economy is actually worse for Trump’s electoral prospects in the Rust Belt, while the fear that attends slippage benefits him.

The second is that the idea of economic anxiety as an explainer for Trump’s victory was always dubious. White identity politics helped him win, but there’s little evidence for a connection between that and economic circumstances. If economic anxiety decided Trump’s fate in the 2020 presidential election, it would be the first time.