The United States economy is starting to show signs of strain as President Trump’s abrupt moves to shrink federal spending, lay off government workers and impose tariffs on America’s largest trading partners rattle businesses and reverberate across states and cities.
Funding freezes and firings of federal workers combined with the prospect of costly trade wars are souring consumer sentiment, raising inflation expectations and stalling business investment plans, according to recent economic surveys.
Local economies are also bracing for a sudden withdrawal of fiscal support, forcing officials to contemplate tax increases or municipal bond offerings to stabilize their budgets. While Mr. Trump has acknowledged that his policies could bring some initial pain, the early warning signs suggest that his blunt approach could come with more ominous risks to the economy.
“There’s more uncertainty than I think is widely appreciated,” said Michael Strain, an economist at the conservative American Enterprise Institute. “All the uncertainty around trade policy, uncertainty around some of the things that the Department of Government Efficiency is doing, I think will have a chilling effect on investment plans and expansion plans.”
Mr. Trump took office last month at a time of stable economic growth and easing inflation. The U.S. economy continues to be the strongest in the world.
But economists have warned that his plans to enact sweeping tariffs could cause prices to rise and trigger trade wars that would weigh on growth. There are early indications that those worries were valid.
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