By Stephen S Roach

When accepting the Republican nomination for president in 2016, Donald Trump proclaimed, “I alone can fix it.” Fix what, exactly? Among other problems, “the economy, stupid”, to borrow the famous mantra from Bill Clinton’s 1992 presidential run. Last year, Trump once again campaigned on the premise that the US economy was “in crisis” and a “disaster”. He began his second term with a solemn promise to usher in “the golden age of America”.

Trump’s bleak diagnosis of the US economy is not grounded in reality — at least not yet. America’s “misery index” — the sum of the unemployment and inflation rates — hardly suggests an economy in dire straits: it was 7.0% in January 2025, down dramatically from its post-pandemic peak of 12.7% in mid-2022, and more than two percentage points below its postwar average of 9.2%. In fact, the latest reading is virtually identical to the 6.9% average recorded during Trump’s first administration (2017-20), which he fondly recalls as “the greatest economy in the history of the world”.

Campaign rhetoric is one thing; acting on it is quite another — especially if its core premise is false. The risk is that the initial policy frenzy of Trump 2.0 — some 73 executive orders in his first month back — could spark the very crisis he currently imagines is now at hand.

The inflationary impact of tariffs is a case in point. Here, I find Trump’s new “reciprocal” tariff plan more worrying than targeted bilateral tariff hikes (which are still a serious blunder, as I have argued ad nauseam). This new plan reflects Trump’s belief that the rest of the world must conform to the American “model”, and his willingness to use tariffs as a cudgel to make that happen. This applies not just to cross-border trade, but also to industrial policies, value-added and digital-services taxes, currency........

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