President Donald Trump is entering a high-stakes week for the economy, with key developments set to shape the country’s financial trajectory. The administration’s decision to impose sweeping reciprocal tariffs on Wednesday—what Trump has dubbed “Liberation Day”—and the release of the March jobs report on Friday will provide fresh insight into economic health. With inflation concerns still lingering and consumer sentiment slipping, experts warn that Trump's aggressive trade policies could pose risks to growth.
The Crossroads of the U.S. Economy
The U.S. economy is in a precarious position. Labor market data has generally been strong, and wage growth has remained stable. However, consumer sentiment has dropped to its lowest level since November 2022, according to the University of Michigan’s survey. This decline suggests that while the numbers may look good on paper, the American public is increasingly uneasy about the direction of the economy—largely due to fears of rising prices that tariffs could exacerbate.
Economist Michael Strain of the American Enterprise Institute sums up the issue succinctly:
“The big question is: Do the sentiment data converge to the hard data, or do the hard data converge to the sentiment data?”
Put simply, either consumer confidence will bounce back to match strong economic indicators, or economic realities will start to align with declining sentiment, spelling trouble for growth.
Trump’s Tariff Strategy: A Bold Gamble
Trump has long been a vocal proponent of tariffs, famously calling the term “one of the most beautiful words in the dictionary.” His administration has already imposed new duties on steel, aluminum, and Chinese imports. Now, with Wednesday’s reciprocal tariffs, any country that imposes duties on U.S. goods will face tariffs of their own. A 25% tariff on all car imports is also set to take effect, and Trump has hinted at additional levies on pharmaceuticals, lumber, and semiconductors.
The rationale behind these tariffs is clear: Trump believes they will make the U.S. “rich” by pressuring foreign countries to lower their own trade barriers and encouraging domestic manufacturing. He points to investments from Apple and Hyundai as proof that his policies are working.
But economists are wary.
“The first term I think there was a lot more bluster than action on many fronts, including on tariffs,” said Kimberly Clausing, a former Treasury official. “I think the tariffs he’s levied so far…are already much bigger than they were in the first term, and more seem to be coming.”
The fundamental concern is that tariffs tend to raise prices, as companies pass added costs onto consumers. While Trump argues that tariffs will bring manufacturing jobs back to the U.S., businesses often respond by either raising prices or cutting costs elsewhere—neither of which guarantees more domestic jobs.
Market Jitters and Inflation Worries
The financial markets reacted negatively last week as fresh federal data showed prices rising faster than expected. The Dow Jones, Nasdaq, and S&P 500 all closed lower on Friday, underscoring investor concerns about the administration’s approach.
Meanwhile, the University of Michigan’s survey found that two-thirds of respondents expect higher unemployment rates within the next year, the highest level since 2009. Consumers are also bracing for a 5% rise in prices, reinforcing inflation fears.
While Treasury Secretary Scott Bessent insists that inflation is “under control,” he acknowledges that affordability remains a major challenge.
“The prices got very elevated under the Biden administration,” Bessent said. “So, we still have an affordability problem and we are trying to address that every day.”
Experts worry that Trump’s tariff-heavy strategy could push the economy into a stagflationary period—where high inflation and stagnant growth create a difficult policy dilemma.
“I do worry we’re moving into a sort of stagflationary period, and those are very hard to deal with,” warned Mark Witte, an economist at Northwestern University.
A Test of Trump’s Economic Strategy
Trump’s election victory in 2024 was largely due to voters’ trust in his ability to handle the economy. He inherited a relatively strong economic foundation, with inflation down from its 2022-2023 highs, unemployment hovering around 4%, and a booming stock market. However, his next steps will determine whether that stability continues—or whether his aggressive trade policies create new economic headwinds.
Strain, the AEI economist, remains cautiously optimistic:
“I’m not expecting a recession. But part of the reason is because I am expecting that the administration will not keep these policies in place for long enough to cause a recession.”
The next few months will be crucial in determining whether Trump’s confidence in tariffs is justified or whether economic warning signs—including declining consumer sentiment and volatile markets—translate into real trouble. For now, Americans will be watching closely as “Liberation Day” approaches, knowing that the costs of this trade battle could ultimately land in their wallets.
