What's Going On With the Economy?

Summary

The Journal: What's Going On With the Economy? Released: March 12, 2025 | Host: Jessica Mendoza, Ashby Jones, Scott Bessant | Co-Produced by Spotify and The Wall Street Journal

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Introduction

In the March 12, 2025 episode of The Journal, hosts Jessica Mendoza, Ashby Jones, and Scott Bessant delve into the tumultuous economic landscape shaped by President Donald Trump's recent policies. As Trump embarks on his second term, the administration's aggressive economic strategies are stirring significant debate and uncertainty among economists, business leaders, and consumers alike.

Shift in Economic Messaging

The episode opens with a surprising statement from President Trump on Fox News ([00:05] Jessica Mendoza), where he did not rule out the possibility of a recession. This marks a notable shift from his previous rhetoric promising a "sweeping transformation of the American economy" aimed at making the nation "affordable again."

Scott Bessant elaborates on the administration's transition period, stating, “There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing. And there are always periods of it takes a little time” ([00:13]).

Implementation of Tariffs and Economic Impact

A significant focus of the episode is the administration's imposition of new tariffs. Trump announced a 25% tariff on imports from Canada and Mexico, with additional tariffs on China ([04:32] Jessica Mendoza). However, the execution has been inconsistent:

• Initial Pause and Reinstatement: The tariffs were initially paused for a month ([05:04] Scott Bessant) but went into effect for only two days before being temporarily exempted for automakers and paused again ([05:16] Jessica Mendoza).
• Impact on Markets: The inconsistency has injected “a lot of uncertainty” into the economy. Ashby Jones notes, “We're starting to see some sort of slippage in the economy” ([05:26]).

Economic Indicators:

• Consumer Confidence: Down nearly 10% from the previous month ([01:10] Scott Bessant).
• Stock Market: The Dow plunged nearly 750 points ([01:14] Ashby Jones), with the S&P 500 and Nasdaq also falling sharply.
• Inflation Concerns: Although inflation remained at 2.8% in February ([07:19] Ashby Jones), economists worry that tariffs could trigger future inflation by driving up prices and increasing costs for American companies reliant on imports.

Government Spending Cuts and Labor Market

Trump's administration is aggressively cutting federal government spending, leading to massive layoffs within the government workforce ([04:32] Jessica Mendoza). Ashby Jones warns of potential ripple effects:

• “It could, over time, sort of blip up unemployment if the people who are getting laid off don't have jobs lined up” ([08:09] Ashby Jones).
• Early signs show decreased consumer spending, with major airlines predicting lower revenues and Kohl’s reporting reduced household goods purchases ([08:47] Jessica Mendoza).

Business Reactions and Uncertainty

The administration's unpredictable approach to tariffs has led to pushback from business leaders. During a meeting with tech CEOs from Qualcomm, HP, and others, executives expressed concerns that the tariffs would harm the tech sector, particularly those reliant on Chinese manufacturing ([14:16] Scott Bessant).

Scott Bessant remarks on the administration's challenges: “What economists talk about is, you know, tariffs are going to be inflationary. They're going to drive up prices” ([07:37] Jessica Mendoza).

Lack of Counterbalance in the Administration

A critical issue highlighted is the absence of a unified advisory team within the White House. Scott Bessant points out, “no one is really saying no to the president” ([16:30]), which leads to what he describes as a “scattershot economic policy way of doing business” ([15:36]).

Future Outlook and Consumer Sentiment

Ashby Jones emphasizes the importance of monitoring consumer confidence and spending as leading indicators of economic health. He notes, “If stock markets start to drop, people get a little bit worried about their own pocketbooks… that can then lead to recessionary forces or pressures” ([18:23]).

Conclusion

The episode concludes with a consensus that the current economic policies under Trump's administration are fostering significant uncertainty. Without a counterbalancing advisory voice, the administration's aggressive tariff policies and government spending cuts may continue to inject volatility into the economy. Hosts urge listeners to stay vigilant, as the coming weeks will be crucial in determining whether these policies will lead to long-term economic benefits or exacerbate recessionary pressures.

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Notable Quotes:

• Scott Bessant ([00:13]): “There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing.”
• Ashby Jones ([05:26]): “We're starting to see some sort of slippage in the economy.”
• Scott Bessant ([07:37]): “Tariffs are going to be inflationary. They're going to drive up prices.”
• Scott Bessant ([15:36]): “It is in part kind of a scattershot economic policy way of doing business.”

Key Takeaways:

• The Trump administration's tariff policies are causing significant market volatility and uncertainty.
• Consumer confidence and spending are declining, signaling potential economic slowdown.
• Lack of a unified advisory team is leading to inconsistent economic policies.
• Business leaders are concerned about the long-term impact of tariffs on sectors like technology.
• The economy is in a precarious transition period, with potential short-term pain in pursuit of long-term gains.

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Additional reporting in this episode from Gavin Bade, Josh Dawsey, Justin Lehart, Paul Kiernan, Conrad Poitier, and David Oberti.

Transcript

[Jessica Mendoza]

On Sunday, President Donald Trump said something surprising on Fox News. He said he wasn't going to rule out a recession.

[Scott Bessant]

Are you expecting a recession this year? I hate to predict things like that. There is a period of transition because what we're doing is very big. We're bringing wealth back to America. That's a big thing. And there are always periods ofit takes a little time. It takes a little time.

[Jessica Mendoza]

His statement marked a shift in the message coming from the White House. Trump has promised a sweeping transformation of the American economy, one that makes America affordable again. But now the messaging is that implementing that vision could cause some short term pain. Here's Treasury Secretary Scott Bessant on cnbc.

[Scott Bessant]

The market and the economy have just.

[Jessica Mendoza]

Become hooked and we become addicted to this government spending. And there's going to be a detox period. Already the economy is seeing some signs that that pain is here.

[Scott Bessant]

Consumer confidence is down nearly 10% from last month.

[Ashby Jones]

The Dow plunging nearly 750 points.

[Scott Bessant]

The S&P 500 Nasdaq both falling sharply as well, amid fears of a slowing economy and stock stubborn inflation.

[Jessica Mendoza]

So the new 25% tariffs on Canada and Mexico and additional tariffs on China risk raising prices for American households on everything.

[Ashby Jones]

We're starting to see some cracks. We're starting to see companies talk about, you know, declining demand for their products and services. So we're starting to see some sort of slippage, I think, in the economy. Maybe in the long run it will prove to be very beneficial to the economy. But I think what it's done at the outset is inject a lot of uncertainty into it.

[Jessica Mendoza]

Welcome to the Journal, our show about money, business and power. I'm Jessica mendoza. It's Wednesday, March 12th. Coming up on the show, what's going on in Trump's economy and why?

[Scott Bessant]

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[Jessica Mendoza]

When Trump returned to the White House in January, the economy was relatively steady.

[Ashby Jones]

What a lot of economists have seen is that Trump inherited a pretty solid economy. Not perfect by any great shakes, but the job market was steady. The inflation numbers are not exactly where they need to be, but they have come to down to a great degree from their 2022 highs. And, you know, things are looking fairly solid.

[Jessica Mendoza]

In the seven weeks since he took office, Trump has acted swiftly to reshape the economy in his vision.

[Ashby Jones]

There's been a lot. I mean, he's thrown a fire hose at the economy, cuts to the federal government tariffs, and then a stricter immigration policy. You know, those, those have been the three main legs of the stool, right? I mean, this is what Trump said he was going to be doing in his second term, and this is exactly what he's doing. He's coming out of the gate really hard and he's putting these policies into action.

[Jessica Mendoza]

Trump's fire hose approach has involved massive layoffs in the federal government, an immigration crackdown, and a lot of back and forth on tariffs on longtime allies of the US So far, the most significant of those policies are tariffs. At the beginning of February, Trump announced 25% tariffs on Canada and Mexico. The President posted on X just a couple hours ago that he's implemented the 25% tariff on imports from Mexico and Canada, but then paused them for a month.

[Scott Bessant]

President Trump now pumping the brakes on a trade war, pausing tariffs on both Canada and Mexico for at least 30 days.

[Jessica Mendoza]

That month went by and then the tariffs went into effect for about two days.

[Scott Bessant]

President Donald Trump says time has run.

[Ashby Jones]

Out and so he is now doubling down on his promise to impose steep tariffs on exports from Canada, Mexico and China.

[Jessica Mendoza]

One day later, he temporarily exempted automakers from those tariffs and then paused all the tariffs again for another month. There are tariffs which are already in effect, like on Chinese goods. Trump first imposed 10% tariffs on them and then a few weeks later, he doubled those to 20%.

[Scott Bessant]

US President Donald Trump said he would impose additional additional 10% tariffs on imports from the world's second largest economy.

[Jessica Mendoza]

The administration also placed 25% tariffs on steel and aluminum, no matter where they come from. In response, the US has been hit with retaliatory tariffs.

[Ashby Jones]

What's happened is you've just seen a lot of uncertainty. People sort of gearing up, bracing for these tariffs, and then they get pulled back, and then they get put back on and they get pulled back off. And so there's just a lot of uncertainty. And it's sort of, you know, you do it once, people will go along with you. You do it twice, then people start to wonder whether or not you're serious about this whole tariff business to begin with, and they really start to wonder what's going on here. So I think that injection, again, of uncertainty into the economy has been as damaging as anything.

[Jessica Mendoza]

You've used the word uncertainty, you know, in coverage, the word whiplash comes up as well. So does it feel like at this moment that what's affecting the economy is the way the administration is rolling this out, not necessarily the tariffs themselves?

[Ashby Jones]

For now, Yeah, I think that's right. And you're right, I've noticed the word whiplash and whipsawed in a lot of our stories. Those two verbs are getting a lot of exercise here in Wall Street Journal copy. But I think I. They're very accurate, and they're in our stories for a reason.

[Jessica Mendoza]

But Ashby says these tariffs themselves are making economists worry about future inflation.

[Ashby Jones]

The inflation numbers. I mean, what economists talk about is, you know, tariffs are going to be inflationary. They're going to drive up prices, and they're going to make life harder, actually, for American companies that import a lot of goods to make their own products. So it's going to have a general inflationary effect.

[Jessica Mendoza]

For now, inflation has not been affected. In February, it was at 2.8%. And Ashby says it could take a while for inflation to change based on what happens with the tariffs. The biggest impact so far has been on the stock market. Both the Nasdaq and S&P 500 have dropped since Trump took office by about 10% and 6%, respectively. An index that tracks fear and volatility on Wall street is up and the dollar's value is down. Right now, unemployment remains low. But Ashby is watching Trump's continued cuts to the federal government, which is the largest employer in the country. And what we're trying to do is reduce government.

[Scott Bessant]

We have too many people. We have office spaces.

[Ashby Jones]

I think it is going to have ripple effects throughout the economy in a number of ways. And I don't think we're starting to see this quite yet, but I do think it could, over time, sort of blip up unemployment if the people who are getting laid off don't have jobs lined up. So if you're talking about consumer Spending. Well, now you're adding a whole big chunk of the workforce that are probably not going to be doing as much spending.

[Jessica Mendoza]

There are a few early signs that consumers are already spending less. This week, several big airlines predicted lower revenue in the coming quarter because they expect people to pull back on travel.

[Ashby Jones]

We had these earnings from Kohl's which show that just overall, maybe consumer spending on household goods and the like is down a little bit. People are starting to pinch their pennies a little bit.

[Jessica Mendoza]

Do we have any historical context for what shrinking the government does to the economy?

[Ashby Jones]

I don't think so, at least not with the federal government. With, you know, very targeted cuts to the federal government. We really slimmed down the size of the federal government in the 1990s. This was sort of a Clinton era policy back then and, but the economy was so good otherwise that those cuts kind of got absorbed and kind of like just lost in the, in the fold here. So I don't think there is any sort of historical parallel to this, at least not one that would kind of give us any sort of, you know, guidance or signposts on, on where we're headed at this point. The big data that we pay attention to, on jobs, on inflation, on gdp, these are lagging indicators, what they call lagging indicators, right. So, you know, they follow the actual phenomenon by several months and we're only several weeks into the Trump administration, so we're really not going to know, which.

[Jessica Mendoza]

Is wild actually to think about.

[Ashby Jones]

Yeah, it feels, it feels like a bit longer than that. But I think the main one economists look to is sort of the tip of the spear in this is like consumer confidence and consumer spending. Right. I mean, what are consumers doing? Because that's really, you know, a big part of the ball game here is are consumers, you know, pulling out their credit cards? Are they going ahead with the home renovation that they had planned? Have they, Are they going ahead with the big summer vacation that they thought they might take with their families? And, you know, that kind of behavior stimulates the economy. Right. And keeps the economy sort of humming. And we've had a pretty good economy for several years now coming out of COVID and now only now we're starting to see some cracks in that coming.

[Jessica Mendoza]

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[Jessica Mendoza]

Yesterday Press Secretary Caroline Levitt reiterated that short term pain is expected in the economy. We are in a period of economic transition. We are in a period of transition from the mess that was created under Joe Biden in the previous administration. Administration. I talked to our colleague Brian Schwartz, he's a White House reporter that focuses on economic policy. What did you think when you heard those comments?

[Scott Bessant]

Well, I think they've come to the reality that this is not going to be as easy as they once thought. The idea of throwing on tariffs onto a variety of different countries, the goods coming from those countries, to be precise, is not going to just be an automatic boom to the economy. Their theory, of course, that the in the Trump administration is that somehow these are going to be revenue builders, that you're going to be able to pay for critical policies such as tax cuts and you name it. But it's clear to me that the administration has figured out that in the short term and they're really, I think they're being as clear as politically they can be that this may not be as simple as they thought and that there could be some bumps in the road in the economy.

[Jessica Mendoza]

Does it seem like Trump believes that some bumps are worth it to make his vision happen?

[Scott Bessant]

If you ask the president, he's convinced again that this is making an impact. He's convinced that there are companies who are saying to him in private or saying some things in public, like Apple, that they're going to be doing more business here in the United States. Apple has announced hundreds of billions of dollars in new investments into the US and that was after Tim Cook met with the President recently at the White House.

[Jessica Mendoza]

Some business leaders are less certain about the administration's moves. On Monday, Trump met with some of them and he did face some pushback to his stop and start approach to trade.

[Scott Bessant]

These were a bunch of tech CEOs from Qualcomm, HP, you name it. Michael Dallas put out on social media. He was there. One was that the CEO said, from what we were told, hey, Mr. President, these tariffs that you're proposing and in some cases moving ahead with are really going to hurt the tech space because we make our various parts for goods and services are made in different countries, you name it. China particularly, that's a big one. But at the same time, according to the president, these people didn't necessarily go as far as saying, please don't do this. It was more of, hey, we have some issues with this. We are, according to the president, we're going to build more here. We're going to invest more into the United States. And again, that's, that's a critical difference than in the past administration because not only are there people not around him in the administration who are willing to take him out anymore, there aren't that many CEOs who are going into that White House and saying, you can't do this. You know, pull the plug, don't go ahead. They're trying to kind of meet him in the middle with this idea that they're moving ahead with some sort of product creation in the United States.

[Jessica Mendoza]

Brian, why is there so much unpredictability from the White House? Like, why is there so much whiplash when it comes to these policies?

[Scott Bessant]

My view on this is that it is in part kind of a scattershot economic policy way of doing business. And what I mean by that is if the president wakes up one morning and says, I want to do tariffs on Canada, right. Or Mexico, then this group of advisors is going to move with him to do that. And sometimes we've heard that amidst this, advisors are kind of not always in the loop on every single thing that's going on in that White House. There are some warnings before announcements are made, don't get me wrong. But then there's some things where there isn't really a unified message all the time, at least in my view on the really kind of precarious steps on moving ahead with tariffs in particular.

[Jessica Mendoza]

So it sounds a bit chaotic, but it seems like no one's really saying no to the president.

[Scott Bessant]

Yes, that's right. The biggest difference from the Trump second go around and Trump's first term, particularly with trade, is there is no one around anymore to tell him, Mr. President, this may not be such a great idea. Here's why. Yes, they talk with him about the impact a set of tariffs could have on the markets. But no one is saying at Least from our reporting, don't do this. And I think that's really kind of an important point. Right. Because if there's no one around as a counter voice to what the President is saying, then all of these guys have to follow everything he's doing. And so anyone in the Republican Party who privately wants this to stop, it's unlikely any of this is really going to change course at this time.

[Jessica Mendoza]

Is there anything that could change Trump's approach here, by which I mean, is there a future that we could look at that's a little bit more predictable in the way these new policies are being rolled out?

[Scott Bessant]

I'm not sure. I mean, it's only a small group of people who could convince him to kind of start having more. More of a straight line in his decisions. That includes Vice President J.D. vance, Chief of Staff Susie Wiles, his family and friends, such as Howard Lutnick. These are the only people that will be able to kind of make an inroad with him and say, Mr. President, it's maybe time to take a different tactic on how we're going to roll out these tariffs. But I don't think there's anybody in his orbit at the moment who's willing to do that.

[Jessica Mendoza]

So until that happens, if that happens, we should all be braced for a little bit more of this uncertainty.

[Scott Bessant]

Yes.

[Ashby Jones]

I mean, there's so much to keep your eye out for.

[Jessica Mendoza]

That's our colleague Ashby Jones.

[Ashby Jones]

Again, you need, like, one of those big video screens that has, like, you know, 10 TVs that are each showing a different kind of economic program or something like that. I am most interested at the moment in sort of this spending, consumer sentiment piece of it, because I think that's really something that could portend, you know, broader trouble ahead. And, of course, that's tied in with the stock market. If stock markets start to drop, people get a little bit worried about their own pocketbooks, and all of a sudden there's a vibe in the air. Right. And the vibe is things are not doing well. Let's everybody hold on to our money and not spend. And that can then lead to recessionary forces or pressures because people hold onto their money, businesses suffer, and then they hold onto their money, and you get sort of a spiral. So I think we're just going to have to wait and see how stocks do over the next couple weeks before we, you know, come to any judgment on this.

[Jessica Mendoza]

Before we go, we wanted to tell you that we're thinking about hosting a live Journal event. Tell us what you want to see by taking our survey. There's a link in our show notes, and for updates on our plans, please leave us your email address. That's all for today. Wednesday, March 12. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode from Gavin Bade, Josh Dawsey, Justin Lehart, Paul Kiernan, Conrad Poitier, and David Oberti. Thanks for listening. See you tomorrow.