Trump’s bubble of economic unreality is coming close to bursting

In the space of a few hours, Donald Trump went from hailing America’s new “golden age” to warning parents their kids would have fewer toys — and they’d cost more. The president’s dizzying switch this week epitomized the hype surrounding his “Make America wealthy again” promise and the pain it might take to get there. Trump’s note of pessimism in a Cabinet meeting was a rare admission that his China trade war will mean fewer goods at higher prices and a dose of truth on a day when reality several times threatened to pierce the White House bubble. It came as the president on Wednesday fought to dispel bad vibes following official data showing the economy contracted in the first quarter by 0.3% — the first big step-back measure of Trump’s impact on US growth. The Commerce Department report doesn’t mean the country is tumbling headlong into an immediate crisis. Some of the underlying figures were more encouraging than the GDP dip. Such reports are often amended upward as more data is processed. And although the US economy has been extraordinarily resilient, it’s normal to see cycles of growth and decline in a capitalist nation. The report is more important for its political and symbolic effect than for its snapshot of a slowing economy. Trump cannot afford for its flashing red lights to become conventional wisdom. To start with, the data rained on a White House flattery offensive billing Trump’s first 100 days as the greatest-ever burst of presidential action. And it pointed to a growing political vulnerability. While much of Trump’s support derives from his tough border policies, the idea that he’s a master businessman who knows how to steer the economy is key to his mystique. If that is stripped away, his political foundation becomes weaker. Second, the GDP report played into a growing sense that bleak economic days are ahead and that this is just the start. Trump cannot allow such an impression to take hold. Apart from its impact on his personal standing, panic among GOP lawmakers could rock the fragile unity of the fragile GOP majority in the House — which Trump needs to pass his “big, beautiful” tax and budget plans. More importantly, amid signs that consumers are already pulling back, evidence that rough times are ahead could become a self-fulfilling prophecy. History shows that a country can talk itself into a recession. The world is watching, too. If Trump’s sliding approval ratings create any impression of political weakness, it could undermine his negotiating position as he seeks to close trade deals with dozens of countries seeking to avoid his tariffs. If foreign leaders think he’s desperate, why would they put good offers on the table? A familiar excuse: It’s all Biden’s fault As usual, Trump’s reaction tells the story. After the release of the GDP report, Trump published a panicky Truth Social post saying, “This is Biden’s Stock Market not Trump’s.” He added, “This will take a while, has NOTHING TO DO WITH TARIFFS.” All day, the president slammed his predecessor to offset blame for the economic numbers. Later, he looked to future data. “This is Biden, and you could even say the next quarter is sort of Biden because it doesn’t just happen on a daily or an hourly basis,” Trump said. Every administration blames its predecessor for grisly economic news — it’s fair game in politics. And it’s true that it takes time for an administration to establish its own economic policies and see the results. Trump is undoubtably responding to a real economic problem — the gutting of many communities in industrialized parts of America as the result of globalization. But his claim that disappointing economic indicators are the fault of his predecessor would have more credibility had he not initiated the most disruptive assault on the global economic and trading system since World War II with little planning, questionable metrics and trademark chaos. The day that Trump stood up in the White House Rose Garden with his scoreboard showing each nation’s tariff rate, he took ownership of the economy. Many of the shocks and uncertainties that are weighing on investors and consumers can be traced directly back to “Liberation Day.” Millions of Americans, meanwhile, have seen the impact on their 401 (k) pension plans. These have been especially scary months for those who have just retired or plan to do so soon. And one important reason why Trump won the 2024 election is that voters judged him to have more credible answers on reducing the costs of living, such as groceries. Despite the president’s attempts to obscure the truth, he’s done little to mitigate those prices, which have a huge impact on the lives of those who — unlike most of his Cabinet members — are not millionaires or billionaires. Public perceptions have also been shaped by an avalanche of evidence that the economy is headed south. “This has probably been the least successful first 100 days of a presidency on the economy in history, in the last century,” former Treasury Secretary Larry Summers told CNN’s Kate Bolduan. “We’ve seen the stock market go down by as much as ever. We’ve seen the dollar go down more than ever. We’ve seen forecasts of unemployment go up. Forecasts of inflation go up. Forecasts of the odds of recession go up. We’ve seen consumer confidence collapse. We’ve seen businesses take back all their previous earnings projection.” Top administration figures dismissed such a downbeat prognosis. “This was the best negative print, as they say in the trade, for GDP I have ever seen in my life. It really should be very positive news for America,” Trump’s trade adviser Peter Navarro told reporters. Trump, meanwhile, claimed credit for a spike in investment in the report — raising the question of why that indicator was down to him while more negative figures were attributable to Biden. Other officials argued the Commerce Department numbers were influenced by a sudden tsunami of imports that suppressed the growth calculation. This, they said, gave a false reading of the economy’s health. But the import surge came as companies stockpiled products in the expectation that Trump’s tariffs would shut down trade. It is therefore more an indicator of coming economic problems than a marker of current strength. The gap between reality and Trump’s promises The dueling mix of rhetoric and data coming out of the administration on Wednesday suggests the White House has a growing problem that will go a long way to dictating the shape of Trump’s second term. Having launched the US and the world into the economic unknown — on his own gut calls — Trump’s path to a successful outcome is looking opaque. That’s why his comment on the cost of toys was so revealing. The president was referring to the potential impact of his showdown with China — the most important front in the trade war. With Chinese President Xi Jinping still refusing to bend to the president’s 145% tariff, the president has been insisting for days that he and his administration have been involved in intense talks with Beijing, despite no public evidence this is the case. US-based observers don’t usually believe China’s communist government over statements from Washington. But this administration’s record of propaganda and falsehoods means that it’s not getting much benefit of the doubt these days. The president, describing China as the “chief ripper-offer” of US factories and workers, boasted that his action had caused cargo ships laden with goods for the US market to turn around and head back to port. He curiously painted all this as a good thing. “You know, somebody said, ‘Oh, the shelves are going to be open,’” Trump said. “Well, maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally.” The remark may have been flippant, but it was revealing nonetheless, and pointed to a looming trap for the president. There is a solid argument that the United States has let itself become too reliant on cheap consumer goods from China and that, for the overall health of the nation, it would be better to have a more balanced economy. But it’s a discordant political argument for a billionaire president who moves in an orbit of wealthy CEOs and members of his Mar-a-Lago club to tell working parents that they will be able to afford fewer toys for their children. And this goes far beyond dolls. While the trans-Pacific pipeline of goods from China has hurt US domestic manufacturing, it has raised living standards for millions of Americans. Almost everyone has benefited from cheaper school supplies, clothes and consumer electronics like flat-screen TVs. Every parent knows how quickly kids grow out of their shoes. Most of that footwear comes from China. If that suddenly goes away, there’s going to be real pain. This was one of the only times he’s leveled with the Americans about the probable cost of his trade clash with Beijing. But the White House is still trying to keep reality at bay. On Tuesday, Press Secretary Karoline Leavitt accused Amazon of a “hostile and political” act following a since-denied report it planned to itemize the true cost of tariffs to shoppers on its websites. And much of Trump’s day Wednesday was taken up by events featuring Cabinet members and friendly business figures lavishing him with praise. “President, your first 100 days has far exceeded that of any other presidency in this country ever, ever. Never seen anything like it. Thank you,” said Attorney General Pam Bondi during the pageant of sycophancy at the Cabinet meeting. It was not the first time recently that the White House communications effort has seemed more geared to boosting the president’s morale than that of the country. Some of this is comical. But it suggests that a president who has set the economy and the world on a perilous course is not getting genuine advice about the consequences. So the gap between reality and Trump’s world will only grow, and will undermine statements like the one he made in Michigan on Tuesday night. “Our Golden Age has only just begun.”