Donald Trump's use of unpredictable tariffs, based on the 'madman theory' of foreign policy, is causing significant economic damage. His actions are shaking the global economy, going beyond mere threats to actual implementation of harmful policies, and surprising investors who once assumed he would back down.
Trump's approach is harming the US's economic and business reputation. Investors are responding by fleeing US bonds and currency, driven by concerns about the stability of a country led by a seemingly unpredictable leader. This leads to higher interest payments on US debt and increases the risk of a financial crisis. The once-safe haven of US Treasury bonds is now being avoided.
Trump's willingness to embrace risk and chaos has increased. His first term saw many risky actions, but he often heeded advisors and drew a line. This line has moved closer to the edge of the cliff as his confidence and the influence of “yes men” has increased. His economic policies now reflect a willingness to cause immediate pain.
Initial market turmoil prompted some claims by Trump allies that only Wall Street, not Main Street, was affected, a statement deemed ludicrous. Following a brief retreat, Trump’s continued tariff threats toward China and Mexico indicate a reluctance to abandon the tariff weapon as a tool, leaving the markets still turbulent. The ultimate cost of Trump's actions to the U.S. economy remains uncertain.