Why is Donald Trump Harming the US Economy? It’s All About His Addiction to Fake News | Jonathan Freedland

Not satisfied with dismantling the post-1945 global framework that provided stability and prosperity to his nation for eight decades, Donald Trump appears intent on undermining the US economy. This drive seems to stem from a disconnect with reality shared by him and the American right.

Let’s begin with the economic destruction that is unfolding before our eyes. For weeks, the US stock market has been on a steady decline, culminating in a notable event on Thursday when the S&P index dropped over 10% from its recent peak reached less than a month ago—a decline that meets Wall Street’s criteria for a “correction.” This indicates that, regardless of any potential market rebound, this is not just a temporary setback.

Discussions of an impending recession are becoming commonplace, and even Trump seems to sense it. “I hate to predict things like that,” he remarked this week. “There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America … It takes a little time.” Did you notice that? The once-optimistic figure who promised immediate change on “day one” is now adopting a more laid-back stance, speaking of “transition” and urging for patience.

The cause of the turmoil is clear: it is Trump himself. His actions since stepping into office just two months ago have unsettled investors. They search for stability but see a president who acts on impulse. These whims can change from minute to minute—imposing tariffs after breakfast only to rescind them before lunch. One moment it’s a 50% tariff on Canadian aluminum, the next it’s 200% on European wine, only for one of those to be canceled within hours. While this keeps Trump in the headlines, it wreaks havoc for businesses needing to plan for the future. Confronted by such unpredictability, they choose to hold off on decisions, resulting in stalled orders, unemployed workers, and less money circulating in the economy.

To complicate matters further, consider a figure armed with a chainsaw who is indiscriminately cutting away at federal institutions that provide essential services—services that business leaders depend on, despite their rhetoric about a minimalist state, such as education, infrastructure, and air traffic control. It’s easy to understand why the only measure rising on Wall Street these days is one that tracks pessimism.

Importantly, it’s not merely the unpredictable nature of Trump and Elon Musk that is raising concerns. Even when implemented calmly, tariffs can be detrimental to economic prosperity. Trump may champion them fervently, but it’s evident that he lacks a fundamental understanding of their implications. He operates under the impression that only the “hated foreigners” like China or Canada will incur the costs, which fails to acknowledge that tariffs are, in fact, a tax on US consumers who end up paying more for imported goods. A tariff on foreign vehicles isn’t borne by Germany but by an American purchasing a BMW. This elevates prices for American consumers, and when foreign nations retaliate with their own tariffs, it turns into a trade war that exacerbates the situation.

This leads to the current fears surrounding stagflation—a troubling mix of stagnant growth and rising inflation. While the term emerged during the Jimmy Carter era, the implications of a “Trumpcession” will hold unique characteristics. In a recent conversation I had with Heather Boushey, an economic advisor to the Biden administration, she noted that Musk’s extensive influence over federal operations, while simultaneously managing his own enterprises, is instilling a chilling effect within industries. “Businesses are observing this and thinking: ‘How can I compete with an Elon Musk running the regulatory bodies, working purely for his self-interests?’ This will cripple investment and innovation, ultimately harming the US economy.”

Boushey warns that Trump’s approach will leave the US less prepared to weather an economic downturn, given that the Trump-Musk budget cuts are stripping away vital infrastructure—more than $1 trillion has been eliminated from Medicaid and food stamp programs alone. When a crisis strikes, it will be families left to face hunger.

This situation is detrimental not only to the country but also politically for Trump: the individuals most reliant on the soon-to-be-slashed government assistance programs like Medicare and Medicaid tend to be Trump’s own supporters. As the ramifications of these cuts become evident—national parks closing during peak seasons, delayed benefits for veterans, or even tragic incidents in previously safeguarded areas—many Americans may turn against the president who pledged to enhance their lives. Especially when they observe him implementing his flagship policy: a massive $4.5 trillion tax cut that vastly benefits the affluent.

Why, then, is Trump pursuing a strategy that is bound to harm both the country and his own reputation? The answer lies in his perception of the world, which is obscured by the very phenomenon he once denounced: fake news.

Over the past decade, the focus has primarily been on individuals like Trump and Musk as purveyors of misinformation. Less attention has been given to their roles as consumers of falsehoods. It has become starkly apparent that Musk spends an excessive amount of time on X, becoming enthralled by the very narratives he perpetuates. This is evident in his uncritical acceptance of various far-right conspiracy theories about Britain.

Trump is hardly any better, subscribing to provable fallacies, such as the claim that Volodymyr Zelenskyy’s approval ratings sit in single digits—when, in fact, the Ukrainian leader’s popularity is considerably higher than his own. This example illustrates Trump’s tendency to disregard information from world-class intelligence agencies in favor of consuming hearsay online.

This behavior underscores Trump’s inability to evolve his fundamental beliefs over decades—he has been championing tariffs since the 1980s. As Zelenskyy aptly stated, Trump is “trapped” within a “disinformation bubble.” This bubble is reinforced by a circle of sycophants that now surrounds him; the “adults in the room” from his first term have vanished, and his encounters with the press are more often than not with representatives from pro-Trump outlets so obsequious that Fox News seems like Edward R. Murrow in comparison.

According to one long-term observer of Trump, he is “more insulated from external information than he has ever been.” Like Saddam Hussein in his bunker as US forces draw near, he is told that tariffs enriched the US in the 19th century and will do the same once more, that Elon Musk enjoys widespread popularity, and that the people are grateful to their leader, all while the economy continues to decline. Inside this information bubble, any dissenting viewpoint can be dismissed, even if it takes mental gymnastics to do so. Trump recently targeted the Murdoch-owned, conservative Wall Street Journal for daring to emphasize the risks of a trade war, retorting that the “globalist” WSJ was “tainted by the warped thinking of the European Union.” Within this bubble, there is no space for truth; it has to be excluded by falsehoods.

For the moment, equipped with the loudest megaphone in the world, the US president can stave off reality. However, eventually, Americans will witness firsthand the consequences of Trump’s actions on the nation and the globe. Their daily experiences will ultimately reveal him as what he truly is: a confidence man who has left them poorer and less secure. The only question remains: when will this realization occur?

Jonathan Freedland is a Guardian columnist

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