The Trump 2.0 agenda is hitting the US economy at an increasingly fragile moment: Morning Brief

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President Trump is heading to Capitol Hill tonight to deliver the first joint address to Congress of his second term. The president said Monday that Tuesday night “WILL BE BIG,” with the economy undoubtedly a major focus.

But his speech also comes the same day he moves forward on what will be his signature economic move to date: the much-bandied-about 25% tariffs on US neighbors Canada and Mexico, as well as additional 10% duties on China.

Ahead of these expected tariffs, stocks got crushed on Monday.

And though we’re only in week 7 of Trump 2.0, it increasingly feels like Trump’s second-term economic machinations are coming at a potentially perilous moment for the US economy contending with a growing list of other concerns.

Economic growth forecasts have tumbled in recent days, as Yahoo Finance’s Josh Schafer writes, highlighted by the Atlanta Fed’s GDPNow model projecting -2.8% GDP growth for the first quarter.

Meanwhile, layoffs are jumping, poking holes in a remarkable streak of labor market growth.

Perhaps most concerning of all: The key drivers of said growth — consumers — are back to feeling quite sour about the state of the economy. And unlike during the Biden years, they’re not just saying it: They’re starting to act on it too. Consumer spending unexpectedly dipped last month as Americans slashed their spending by the most drastic level in about four years.

Even if you think of tariffs as a negotiating tool that will all end up working out in the end, it’s clear that the lack of clarity has already weighed on consumers — and businesses.

New data out Monday showed today’s uncertainty throwing manufacturers, in particular, for a loop, shrinking business activity and prompting a surge in costs to companies.

As Yahoo Finance’s Ben Werschkul writes, Trump’s latest tariffs are, quite simply, different from what hit the economy the first time around.

One group estimates that Trump’s tariffs on Canada and Mexico alone would surpass the economic impact from those of his first term. (Never mind on China and the EU — and then there’s lumber, aluminum, agricultural products, oh my!)

Fed Chair Jerome Powell has often talked about the danger of high inflation becoming entrenched in Americans’ minds, and drips of that are starting to appear in the data.

Americans’ sentiments about the economy are plummeting again, and they now expect inflation to surge in the year ahead. Trump’s approval rating — arguably as good a bellwether as any — is already on the verge of negative territory on an aggregate basis.

During Trump’s first term, the economy was in a strong position to weather the uncertainty of his tariffs.

Stocks moved along a steady upward trajectory in the first three years of his administration. The president received a similar reception from investors this time around.

But in addition to the tariffs being simply smaller during the first Trump administration, a smooth path to corporate tax cuts and a strengthening labor market also helped cushion the blow.

In 2025, the situation might not be so straightforward.

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