Trump Is Leading The Economy Into A Substantial Slowdown

Over the past week, new economic data has painted a picture of a rapidly decelerating US economy. In April, industrial production grew at its slowest rate since February 2017, retail sales declined for the 3rd time in the past 5 months, and capital spending fell by 0.9% to its lowest overall level since June 2018. And this data was compiled before Trump increased tariffs on $200 billion of Chinese goods from 10% to 25%. Since then, the numbers have gotten even worse. In May, US manufacturing production fell to its lowest level in 9 years while overall business activity fell to its lowest level in 3 years. Meanwhile, growth projections for Q2 GDP have fallen rapidly, with the Atlanta Fed, the New York Fed, JP Morgan, and Morgan Stanley all seeing growth under 1.5% this quarter. Indeed, the Fed's preferred metric for forecasting recessions - the yield curve - is now at its flattest point (meaning the highest probability of recession) since 2009. Trump's trade war, and recent significant increase in tariffs, has played a large role in this slowdown. Export markets have dried up for American farmers and manufacturers, investment has declined as firms face significant uncertainty, and higher costs for consumers and producers alike have caused output to slow. You can find more of NDN's analysis on why the economy is currently worse than conventionally believed here. As well, you can read our work detailing the failures of the President's tax cut here and his trade policy here

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.