gotchanewsdaily.com 
CNN
—
With his chaotic trade policy, President Donald Trump is digging himself into an economic and political hole so deep, it may prove impossible to climb out.
On Wednesday morning, just after markets spent a day reeling from Trump’s on-again-off-again threat to levy extraordinary energy, steel and aluminum tariffs on Canada and to destroy the country’s auto industry, Trump placed tariffs on all steel and aluminum imported from every country around the world, a policy that could drive up prices on a broad range of consumer and industrial goods for Americans.
Wall Street has grown nervous about the damage Trump’s policies could inflict on America’s still-strong but increasingly wobbly economy. Stocks have plunged, with the Nasdaq falling into correction (a decline of 10% from its recent high) and the S&P 500 flirting with that inauspicious territory.
Trump has been provided with multiple escape routes and off-ramps: His advisers and economic brain trust, including Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent and National Economic Council Director Kevin Hassett have been frequent guests on cable and network news shows, on which they called Trump’s tariff policy “fluid” and have noted good progress with foreign countries on negotiations on key disputes like fentanyl and immigration crackdowns.
At times, Trump has appeared to take the hint: He has twice tapped the brakes on Canadian and Mexican tariff plans, pushed back the apparent date in which dollar-for-dollar reciprocal tariffs would go into effect, paused the de minimis exclusion and this weekend delayed dairy and lumber tariffs that he said would go into effect by now. And on Tuesday, officials from Canada and the United States agreed to meet later this week to negotiate their trade disagreements, a potential detente in an escalating trade war.
But it seems as though Trump simply can’t help himself. Just when you think he’s out, he pulls himself back in. Trump has become addicted to tariffs because of the kind of concessions he can gain from them: In exchange for a threatening social media post and a promised meeting, Ontario backed away from punishing electricity surcharges.
“The president is in a tight spot, and every tariff (or threatened tariff) makes his position more difficult,” said Simon Johnson, professor of global economics and management at MIT. “If he keeps going in this direction, prices will rise and the economy will slow even further.”
Wall Street, Corporate America and consumers are growing fed up with the routine.
“Investors are concerned this will become an own-goal, manufactured economic slowdown,” said Art Hogan, chief market strategist at B. Riley Wealth Management. “We don’t know what the endgame is.”
If he’s not careful, Trump could seriously harm America’s economy with the higher prices tariffs could inflict on businesses and consumers – ironic for a president who was elected because issue No. 1 for Americans was an inflation crisis.
“For anyone who voted for Donald Trump on his promise to lower prices, it’s going to be a shock and potentially infuriating that prices haven’t gone down – and instead, they’ve gone up,” said Scott Lincicome, vice president of general economics at the Cato Institute’s Stiefel Trade Policy Center. “I don’t see an economic or political way out of this.”
The inflation and recession conundrum
But if Trump is looking for a “win” from tariffs, there’s this: His trade policy could shock the economy so severely that it would finally kill America’s inflation problem.
It could be a painful pill to swallow. But Speaker of the House Mike Johnson hinted at that possibility Tuesday when he defended Trump’s policies as a necessary “shake-up.”
“This is what’s required in my mind to start the process of repairing and restoring the American economy,” Johnson said. “I believe that the strategy is going to work.”
Consumer spending makes up more than two-thirds of America’s economy, and the threat of tariffs has already spooked Americans. If they stop spending, they could slow the country’s economic engine – and bring prices into check as demand sinks.
Retailers are warning that could be starting to happen. Walmart, Target, Kohl’s and Dick’s all predicted on recent earnings calls that a consumer pullback is on the horizon because of economic uncertainty caused by Trump’s tariff threats. The S&P 500 retail index (XRT) was at a 52-week low Tuesday.
Delta cut its profit forecast in half Monday after warning that economic uncertainty was leading potential flyers to reconsider their travel plans. And a key measure of small business uncertainty surged to the second-highest level since 1973, according to a National Federation of Independent Business report on Tuesday.
To be clear: A recession isn’t around the corner, but the threats are rising. Goldman Sachs increased its recession chances to one-in-five. And Former US Treasury Secretary Larry Summers told CNN Monday there is a “real possibility” of a recession caused by massive uncertainty over Trump’s policy.
“The just announced tariffs on Canadian steel and aluminum are the worst trade policy yet. Increasing the price of key inputs for the US manufacturing industries–who employ 10 million people–is what a U.S. adversary would do,” Summers posted on X Tuesday. “It is a self-inflicted wound to the U.S. economy.”
No one wants a recession. But if one were to happen, the benefit, if there was one, could be that America’s persistent inflation crisis could be solved.
“It’s hard to want a recession, but I think that’s the only way tariffs would not be inflationary,” said The Liscio Report’s Philippa Dunne. “It’s such a sad situation, because the people who are struggling and voted for him will be hurt.”
Trump’s aides have downplayed recession fears, suggesting instead that the new tariffs will cause momentary “disruption” as global trade is realigned toward the United States.
White House press secretary Karoline Leavitt on Tuesday defended Trump’s tariffs as a necessary measure to save the US economy.
“Tariffs are a tax cut for the American people,” she said during a press briefing, arguing that tariffs are needed to bring production back to the United States and punish countries that have taken advantage of the US in the past.
But if Trump keeps passing up off-ramps, he may have little choice.
“The reality is Trump has attached himself to tariffs. He has pushed to the forefront that tariffs increase prices. The cake is baked unless the tariffs go away,” said Lincicome. “But the only way inflation drops from all of this is if we tip into a recession.”
CNN’s Matt Egan contributed to this report.
