How Much More “TACO” Madness Can the U.S. Economy Take?
The prices of the White House were welcomed, said Donald Trump to Kristen Welker, from NBC News last week, adding that the stock market had just reached a new summit. Trump was right on the market, but he did not mention why the investors submitted the S. & P. 500 and the Nasdaq at unprecedented levels despite his threats, again, to impose punitive prices of up to fifty percent on goods imported from the whole world: they do not believe that it will ever. Or, like the acronym which has become an article of faith on Wall Street, “Taco– Trump always makes chickens.
After Trump announced for the first time his world rates with a big fanfare, in Rose Garden, on April 2, the value of stocks, bonds and the US dollar dropped. In one week, he announced a three -month break from his most punitive withdrawals, which varied up to fifty percent. Trump advisor Peter Navarro said the administration would use the extension of ninety days to conclude ninety new commercial offers. When the period ended last week, only two transactions had been concluded – with the United Kingdom and Vietnam – and these are just brutal contours. Rather than letting the prices come into force, Trump postponed them again, this time until August 1. He also told journalists that this new deadline could be “not a hundred company by what”. Taco,, Taco,, Taco. At least it is taking Wall Street.
“I don’t care about prices,” said Max Kettner, an investment strategist at HSBC Bank, Financial time Last week. “What prevents them from saying, let’s give another three months?”
Wall Street’s cynicism is understandable. But, from points of view elsewhere in the American economy, in particular those directly involved in international trade, the prospects are less reassuring. Trump did not withdraw from the imposition of all prices – in abundance. A ten percent levy is now in force for almost all goods produced abroad, with the exception of smartphones, other electronic goods and semiconductors. Chinese items face a minimum rate of thirty percent, and this rate will surely go higher if the two parties cannot finalize a trade agreement, the contours of which are apparently agreed in May. On Friday, the Treasury Department said that pricing revenues had reached $ 27.2 billion last month, which has borne the total for the financial year to more than a hundred billion dollars.
Then there are the industry prices by industry that Trump has introduced or raised, such as samples of twenty-five percent from cars and car parts, and fifty percent on steel and aluminum. Last week, he announced a service of fifty hundred on copper, a metal used in the production of power lines, water pipes, roofing, electrical circuits, refrigerators, data centers, electric-vehicle batteries, etc. In the American term markets, the copper price for delivery in the coming months has reached a record. Companies that manufacture or sell copper items are about to see a strong increase in their costs, as are many other companies that import components or finished products.
Among the latest Salvos de Trump, delivered in letters to individual countries and groups, there are threats to impose prices of thirty percent on Mexico and the European Union articles, and a levy of fifty percent on Brazil goods – a country with which the United States leads a trade surplus – in punishment for the treatment by the government of its former leader, and the complly of the accused state, Bolsonaro. But, even if some of Trump’s latest threats are empty, the higher actual effective rate rate increased from 2.4% at the end of the Biden administration to 15.8%, according to the Yale budget laboratory. It is the highest since the great depression. If Trump threats come into force on August 1, the effective rate will reach eighteen percent, the budget laboratory calculates.
Until now, higher prices have not appeared much in the price indices at the economy scale. This is partly because many American companies have ordered additional stocks of items likely to be tariff before the entry into force of Trump policies. In addition, some companies seem to absorb some of their additional costs to lower beneficiary margins rather than transmitting them to consumers, but economists and business leaders warn this approach that will last little. Last week, the CEO of Hasbro, which sells many toys made in Asia and Latin America, said prices could increase down.
“I think higher prices arrive even if the macro-doists, until May, have not yet reflected it,” said Michael Wolf, Deloitte Touche Touche Touche Trouped, a global professional service company. “In a sense, it is not surprising. I did not expect companies immediately to transmit higher costs. But over time, and as stocks decrease, it is only long that you can hold.” Ian Shepherdson, president of Pantheon Macroeconomics, accepted. “People rush into judgment too early,” he said in an email. When Trump increased the prices in 2018, Shepherdson continued, it took prices for three months to start increasing and a few months for the process to work fully in the economy. “Someone has to pay the prices, and there is not much sign that exporters in the United States wear the box,” added Shepherdson.
Even if the stock market was largely walked without being disrupted – prices fell a bit on Friday – the chaotic deployment of prices has already considerably increased economic uncertainty and stole the economy with part of the momentum of which Trump inherited the Biden administration. The day after the Covid-19 Pandemic, the American economy has experienced a stronger recovery than other advanced economies. In 2023 and 2024, the GDP adjusted to inflation extended to an annual rate of 2.9% and 2.8%, respectively. Since then, growth has been significantly weakened.
In the first quarter of 2025, GDP growth was slightly negative as consumer spending was weakened and imports increased as a front business in prices. (Imports do not increase GDP, which measures goods and services produced in the United States.) The initial report of the Department of Commerce on GDP in the second quarter, which will be published on July 30, seems to show a rebound to a growth of 2.6 percent on a wide range of economic statistics. Even if this prediction turns out to be correct, however, the economy will have lagged behind in the first half. And the fixing of Trump with the prices will be largely to blame.
What will happen from here? Economic forecasts are often unreliable, but they can be useful for looking for different scenarios. In the latest Deloitte forecasts, which was published last month, the reference case assumes that the average rate rate remains around fifteen percent and that the Fed is the reduction in interest rates for a few more months. GDP increased by 1.4% in 2025, half the rate last year. In 2026, growth remains depressed at 1.5% and the unemployment rate expanded up to 4.6%. (Last month was 4.1%.)
Forecasts have also considered a more optimistic scenario, in which trade tensions facilitate ease, transactions are concluded and the average rate rate falls to 7.5% by December. In this case, this year’s growth is only 1.8%, but it bounces to 2.9%next year, and the unemployment rate remains at around 4%. Finally, Wolf and his colleagues examined a more pessimistic case, in which commercial discussions with China, the EU and other countries collapse, and the effective rate rate increases to twenty-five percent. Taking up what happened in April, the bond market reacts negatively to these developments, and long -term interest rates increase, which increases the cost of mortgages and other loans. The economy falls into a recession, in which GDP decreases 1.6% next year, and unemployment increased to 5.7%.
We can label these scenarios as bad, better than expected and disastrous. Which eventually looks like reality depends on the main question of knowing if Trump is really the Taco Man or man prices. But, in any case, even optimistic, its quixotic effort to manage a global economic superpowered as if it were a first hotel by the sea – if you want to access it, you have to get out of it – it has already inflicted a lot of unnecessary harm. Do not try to explain this to him. You waste your time. ♦
