Economists say that the uncertainty of President Donald Trump’s pricing threats and mass layoffs of government employees are starting to have a “scary” effect on the American economy.
“It is a very difficult commercial environment because they cannot plan their cost structure,” said Rachel Ziemba, principal scholarship holder for the Center for a New American Security. “This adds to the uncertainty of investments, and some people hold investments.”
Trump has so far imposed 10% prices on Chinese imports and says that it will impose 10% additional rates, plus 25% in Canada and Mexico on March 4. Trump also says that he will impose “reciprocal prices” which correspond to the tasks that other countries take the United States which present on the pricing levels of cars, semiconductors, steel and aluminum. Even if Trump does not finally progress with all his pricing threats, simple uncertainty has a frightening effect.
“If one of the inputs in your factory increases by 25%, you could reduce your production and say that we may have to dismiss certain people,” added Ziemba.
Elon Musk pronounces remarks at a meeting of the cabinet held by President Donald Trump at the White House, on February 26, 2025 in Washington.
Andrew Harnik / Getty images
Meanwhile, the reduction of federal workforce by the Ministry of Effectiveness of the Government across the country “also has an impact on consumption, because people lose their jobs or are afraid of losing their jobs, which could save them more money,” said Ziemba.
This week, the survey of the feelings of consumers of the Conference Board revealed that it recorded the highest monthly decrease since August 2021.
“The views of the current labor market conditions have been weakened. Consumers have become pessimistic about future and less optimistic commercial conditions for future income. Pessimism about future employment prospects has worsened and has reached a 10 -month summit, “said Stephanie Guichard, principal economist for global indicators at Conference Board.
“Average inflation expectations of 12 months increased from 5.2% to 6% in February. This increase has probably reflected a mixture of factors, including sticky inflation, but also the recent leap of the prices of key staples such as eggs and the expected impact of prices, “said Guichard.
The prices of Canada and Mexico would have a radical effect, because they are the two largest trade partners in America. It could increase prices to grocery store and gas pump. Ziemba also noted that the cost of cars could increase by several thousand dollars.
“Whenever a car part crosses the border, the 25% prices could be very expensive,” said Ziemba. “We could see the cost of building a house increase considerably.”
