The Trump Effect: On the Economy

By Dominic Pino

Thursday, September 18, 2025

 

This is the age of economic populism, according to political commentators. Trump is responding to widespread discontent with the “globalist” or “neoliberal” consensus that supposedly reigned for the past few decades.

 

The strange thing about this populism, though, is that Trump, rather than the people, gets to decide what it means. The flashy economic agenda items in his second term so far have been things that few people had been calling for prior to his announcing them; but once he announced them, anyone who opposed them was deemed to be against the people.

 

Protectionism has long been a hallmark of economic populism, but Trump’s tariffs consistently poll as one of the least popular parts of his agenda. There are other, more popular ways Trump could have designed his tariff policy. Punitive tariffs on China would go over well with more voters. Sticking to key sectors with domestic constituencies, such as steel and aluminum, to maximize political benefit while minimizing political cost, would have been the normal calculation. That’s basically what Trump did in his first term. He launched a trade war with China and hired a steel lobbyist, Robert Lighthizer, as his trade representative. While economists pointed out that these policies didn’t work, voters by and large didn’t care much, and many liked the “tough” posture regardless of outcomes.

 

The second term is completely different. There really is no domestic constituency for the so-called reciprocal tariffs imposed under the International Emergency Economic Powers Act. There really weren’t lobbyists or trade groups or concerned citizens calling for tariffs on each country calibrated to bilateral trade deficits. There is plenty of pay-to-play going on, but it’s less pronounced in the case of the tariffs than it is in other areas. That’s not what one would predict based on U.S. history, throughout which tariffs have been the pay-to-play bonanza. The administration wants 39 percent tariffs on Switzerland not because some interest group asked for it but for the love of the game. (Now that the tariffs are in place, though, the lobbyists are swarming to try to get carve-outs.)

 

Usually, presidents bend over backward to help the car companies, in the name of populism and patriotism. Trump’s tariffs are costing them billions of dollars. Auto industry trade groups opposed auto-parts tariffs, but Trump said these tariffs would help them and went ahead anyway.

 

One of the arguments the administration makes for the tariffs is that they support the domestic manufacturing sector, which is important for national security and job creation, even if they are a net negative for the overall economy. But the manufacturing sector has contracted for each of the past six months, and there were 78,000 fewer manufacturing jobs in August than there were in January.

 

Most voters in rural Pennsylvania — like most voters anywhere in the U.S. — could not pick former Brazilian president Jair Bolsonaro out of a police lineup, let alone tell you they’re upset with how the new Brazilian government has treated him after his presidency. When Trump cited Bolsonaro’s treatment as part of his reasoning for higher tariffs on Brazil, a country with which the U.S. has a trade surplus, no one could plausibly claim that he was standing up for the forgotten blue-collar American.

 

It’s difficult to think of many government offices that fewer voters care about than that of the commissioner of the Bureau of Labor Statistics. Politicians historically haven’t cared much about it, either, frequently leaving the agency to an acting commissioner when terms expire. The current acting commissioner, William Wiatrowski, has now scored an acting-commissioner hat trick, having served in the role twice before Trump fired Erika McEntarfer to give him his third stint.

 

Trump’s firing of McEntarfer didn’t have anything to do with standing up for working people or any populist slogan, and it wasn’t something people were calling for. She was the opposite of a “diversity hire” or a partisan hack, having been confirmed in 2024 by an enormous bipartisan majority of senators, including JD Vance and Marco Rubio, on account of her years of experience with Census Bureau statistics. The BLS commissioner Trump appointed during his first term, William Beach, called the firing “totally groundless.”

 

The political benefits to Trump aren’t clear. If his nominee, the unqualified but loyal E. J. Antoni of the Heritage Foundation, gets confirmed, people can dismiss any good jobs report as biased. If there is a major break in the jobs numbers when the new commissioner takes over, there will be good reason to believe that’s true. If there isn’t, and there probably won’t be, then what was the point of replacing the commissioner? People don’t follow the jobs reports to form their opinions of the job market in the first place. They rely on their own experiences and those of people they know. The idea that some bureaucratic agency in Washington would even be capable of hoodwinking the public’s perception of the job market is contrary to populism’s faith in the people’s ability to sniff out the truth.

 

Most people are also pretty skeptical of the government’s ability to run businesses. They generally oppose government bailouts of failing companies. Using taxpayer money to save corporations from their own mistakes upsets basic notions of fairness and reinforces the idea that there’s one set of rules for the rich and powerful and another for the little guy. Trump voters were not the vanguard of a new movement for nationalization. Yet Trump has effectively nationalized U.S. Steel, and the government has said it will acquire stakes in Intel and MP Materials, a mining company, while entertaining the possibility of greater involvement in defense contractors and other firms.

 

Trump did talk about a sovereign wealth fund for the U.S. on the campaign trail, but it was hardly the centerpiece of his agenda or a particularly popular idea. The first step would be to acquire some sovereign wealth rather than add around $2 trillion of sovereign debt each year, as the U.S. is currently doing. Norway has a sovereign wealth fund. Norway has also had budget surpluses averaging around 10 percent of GDP per year since the 1990s.

 

One aspect of Trump’s economic agenda that clearly did have widespread popular support was his making permanent the income tax cuts that he signed during his first term. Voters did not want a tax hike at the end of this year, which would have happened absent the law that Trump signed on July 4. But any Republican president in the same situation would have made the tax cuts permanent. This was not a departure from previous policymaking.

 

It would be nice to see Trump use his agenda-setting power more often to enact policies that most voters don’t care about that would nonetheless be good for the country. He did, for example, in the tax law, include permanent full expensing for most categories of business investment. The unfair treatment of capital in relation to labor in the tax code that persisted for decades has now largely ended because of his signature on the big, beautiful bill. Most voters don’t care about that, and Trump probably doesn’t either; the White House press release from the day the law was signed doesn’t mention it at all. But it’s the law now, and that’s great.

 

A big part of the reason why this policy reform worked is that it arose from Congress, which under the Constitution is supposed to be the lawmaking body. The deliberative process inherent to a legislature is messy and difficult, but it involves a more thorough vetting of ideas for both their quality as public policy and their political effect.

 

If Trump wants his tariff agenda to be immune from legal challenges, he could have asked Congress to pass a law that says exactly what his executive order says. It still would have been cuckoo for Cocoa Puffs as a matter of economics, but it would have been completely legal. Congress has the power to levy tariffs, and Trump has a Republican majority in Congress that could have passed a tariff bill by means of the reconciliation process to avoid Democrats’ filibuster. He won’t do that because he knows, despite their public statements of unwavering and fawning support, that most Republicans in Congress don’t actually want tariff rates on the level of Smoot–Hawley, and they would all be hearing from business owners in their districts or states who are harmed by those punitive taxes. But now, if you oppose tariffs, you’re anti-populist, because economic populism on the right is defined by whatever Trump does at any given moment.

 

The overall effect of what he has done so far in his second term has been to increase the president’s power in the U.S. economy. Some of his actions may be struck down by the courts, mitigating some of the effect, but many will be allowed to stand. Increases in presidential power don’t tend to be undone or left alone by future presidents, who find them useful for their own purposes. And so the age of economic populism may wind up concentrating more power in the Washington establishment, which could spur its own populist revolution (counterrevolution?) in the years to come.