To misquote the late Republican senator Everett Dirksen: “A billion here, a billion there and pretty soon you’re talking about serious money.” It would take quite a few of those billions to impact the living standards of the five most unfeasibly wealthy men who lined up to kiss the ring at Donald Trump’s inauguration in January.
Yet this quintet of tycoons, Tesla’s Elon Musk, Jeff Bezos of Amazon, Google co-founder Sergey Brin, the CEO of Facebook owner Meta Mark Zuckerberg and Bernard Arnault, the French billionaire behind the LVMH luxury goods empire, are already some £160 billion worse off than they day they paid homage to the 47th US President.
The plutocrats can take it on the chin — for now — but for millions of ordinary Americans whose wealth and savings are tied up in the stock markets that have plunged over recent days, these are worrying times.
Wall Street’s main share indices are all down since Joe Biden formally handed over to his successor — and predecessor — in Washington DC’s Capitol Rotunda on January 20.
The tech-focused Nasdaq index has been worst hit, losing almost a 10th of its value since the start of the year, with the fall on Manic Monday wiping out $1 trillion of value. Shares in Musk’s Tesla are down almost 40 per cent this year. The more broadly based S&P 500 index is around 5 per cent lower this year.
This is not crash or even “bear market” territory… yet, but, emphatically, neither is it the “boom like no other” promised by Trump, who trilled at an investor conference less than a month ago, “The stock market is going to be great.” It appears to be part of a newly minted, long-term Maga plan.
Tone shift
Indeed, in a quite remarkable change of tone, Trump has refused to rule out a recession for the world’s largest economy, which was growing at an enviable 2.3 per cent in the fourth quarter of 2024 when he won the election.
The immediate cause for the turbulence is the extraordinary outbreak of hostilities against America’s biggest trading partners and closest allies. Trump talked tariffs during the campaign as part of his America First agenda, but few investors believed that he would carry through on his threats so aggressively and at such pace.
As Ipek Ozkardeskaya, senior analyst at Swissquote Bank, put it, stock markets “were heavily hit by the fears that Trump trade and international policies would have a terrible economic and geopolitical fallout in the US and beyond its borders. The recession bets are rising by the day…”
This week it was the turn of the European Union and the UK to feel the heat, with 25 per cent tariffs on all steel and aluminium imports from the bloc coming into force, triggering counter levies from the EU on around £20 billion worth of US exports.
For American voters, coming down from the Maga Kool-Aid high, there is now a sombre realisation. Tariffs will make many goods more expensive, push up inflation, potentially harm their standard of living, and wreak havoc with the supply chains of millions of small and medium-sized businesses. Larger corporations are also vulnerable to a slowdown in consumer confidence and spending.
Virtually all the lights on the economic dashboard are now flashing red. This is far from the “little disturbance” that Trump referred to in a Fox News interview at the weekend.
Extremely high stakes
Conventional wisdom has it that stock market slumps and the prospect of recession are the political equivalent of Kryptonite in America, with voters quick to punish presidents who do not deliver on the economy.
Already a slim majority of Americans disapprove of his handling of the economy, and that is only going to get bigger.
So why is Trump apparently hellbent on engineering an economic and financial crisis that could devastate his approval ratings?
Well, he has certainly changed his tune on the stock market. During his first term he would frequently boast-post with comments such as: “Stock market at an all-time high. That doesn’t just happen.”
Now the mood music is very different.
The talk within the administration is of a generation-long economic play aimed at halting and reversing the relative decline of the USA, particularly against its most threatening rival China. If there is short term collateral damage…so be it. “You really can’t watch the stock market,” Trump said in his Fox News interview at the weekend. “If you look at China, they have a 100-year perspective, we have a quarter. We go by quarters.”
There was some temporary respite this week when US inflation for February came in at 2.8 per cent, slightly better than forecast. But these are the last of the Biden era economic figures.
Egged on by Maga hardliners such as Musk and commerce secretary Howard Lutnick, Trump seems to have been persuaded that recession and all the political and economic pain that goes with it is a price worth paying to stop the rot.
Indeed Lutnick admitted as much when pressed on the subject in a CBS interview earlier this week. “These policies are the most important thing America has ever had,” he said dramatically. “It is worth it… The only reason there could possibly be a recession is because of the Biden nonsense that we had to live with. These policies produce revenues.”
The stakes are immensely high. As a second term president in his late Seventies, Trump can indulge his legacy ambitions. But it is one thing to pursue a policy of short-term pain for long-term economic gain, it is quite another to allow caprice and chaos to become the driver of economic policy.
Investment and growth thrive on stability. For now at least, Americans face a period of self-inflicted disorder. The impact will be felt around the world for years to come.
Jonathan Prynn is business editor
