Trump’s Business Acumen Has Long Been His Armor. It’s Being Put To The Test.

President Donald Trump spent months on the campaign trail promising to shepherd the country to an economic Eden. This week is shaping up to be his first major test.

The normally bullish Trump over the weekend declined to rule out the possibility of a full-blown recession as his tariff policies threaten to spark a massive global trade war that could drive up prices and further pinch Americans’ already tight pocketbooks. His remarks sent already tetchy markets into a nosedive Monday morning — with the Dow dropping over 400 points and the S&P 500 and Nasdaq tumbling to their lowest levels since September — just days after they spooked and then calmed over his tariffs on Canada and Mexico.

Further complicating matters, congressional Republicans are playing a game of chicken with Democrats that could end in a government shutdown by Friday.

Together, these forces could create the biggest economic storm since the Covid-19 pandemic that rocked the economy and helped put former President Joe Biden into office.

Trump is indicating “at least the possibility that he’s not going to be deterred by market volatility, he’s not going to be deterred by falling stock prices, and that he might not even be deterred by an economic downturn,” said Michael Strain, director of economic policy studies at the American Enterprise Institute. “That is new for him.”

And while economic unsteadiness in the U.S. predates Trump’s second term — indeed, it played a significant role in his return to office — these latest economic pressures are largely of the president’s own making and will test his appetite for weathering short-term economic uncertainty and political backlash in the hope of long-term economic gain.

“His antics have been very painful. At least he’s acknowledging that there’s pain,” said a person close to the administration, granted anonymity to speak candidly about its decisions. “I don’t quite get it because in the first administration he judged himself every day by the stock market. He has now chosen to judge himself by something else — I don’t know what it is.”

Polling shows that Americans are unhappy with the economic situation and are increasingly blaming Trump for it. A Reuters-Ipsos poll taken last week found that 51 percent of people believe the economy is on the wrong track, compared to 31 percent who think it’s on the right track. Forty-nine percent of people disapprove of Trump’s handling of the issue, compared to 39 percent who approve, the poll found.

“He has to acknowledge there’s going to be some pain. He can’t say everything’s perfect. If he said everything’s perfect, people would think he lost his mind,” the person added. “You can’t be totally that out of the picture, and say, ‘Everything's great, everything's fine, everything I'm doing is working,’ and have the market down 2 to 3 percent every day.”

A spokesperson for the White House did not immediately respond to a request for comment.

In recent days, Trump has wavered between his usual impulse to telegraph economic optimism and a more pragmatic, sober assessment of the country’s short-term outlook that appears to implicitly acknowledge that no immediate economic relief is on the horizon.

We're starting to see "nerves in markets, nerves among employers and — outside the economics — nerves from Republicans on the Hill," said Daniel Hornung, a former deputy director of the National Economic Council for Biden.

Part of the difficulty for the administration in messaging around tariffs, even as they pledge to bring down the cost of living, is prices going up on foreign goods is the point. Without that effect, there is little motivation to shift production to the U.S.

"The way to tell whether it works is if the prices are going up for the goods that you’re putting tariffs on,” said Neil Dutta, head of U.S. economic research at Renaissance Macro Research. “They’re all about, 'Well you know inflation doesn’t really go up with tariffs. The dollar absorbs it.' What they’re really saying is, they don’t work. That’s another way of saying it doesn’t work. If it’s not raising consumer prices ... you’re basically telling me it’s not as effective as you say it is.”

Trump spent little time addressing the economy during his joint address to Congress last week, other than a brief divergence to complain about the “total mess” he said he inherited from Biden and the “out-of-control” price of eggs. The economic strategy he telegraphed during that address — bringing down energy prices, attracting business investments in the U.S. and cutting government spending — is a long-term one that appears to offer no immediate relief to Americans who believe prices are still too high.

Indeed, during that address he acknowledged that his tariffs are likely to make things worse in the short term, warning that there would be “a little disturbance” though he promised it “won’t be much.” It was a message the White House reiterated throughout the week, with White House press secretary Karoline Leavitt saying the president “was realistic” and “level set with the American people.”

He appeared to course correct on Friday when he called an impromptu press conference to tout the February jobs report — which saw the U.S. economy add 151,000 jobs — and what the president described as a “manufacturing turnaround” in the U.S. with 10,000 manufacturing jobs created.

Trump promised more jobs are to come as a result of the more than $1.7 trillion in investments companies have announced since he took office.

Then on Sunday, Trump appeared to have lost that optimism and said in an interview with Fox Business’s Maria Bartiromo that there would be a “period of transition” after the tariffs are implemented, declining to rule out a recession.

“We're bringing wealth back to America. That's a big thing… it takes a little time, but I think it should be great for us,” Trump said.

This economic uncertainty comes as Trump’s tax cut agenda has been put on the backburner amid the looming government shutdown. Trump allies have warned that failure to extend the president’s 2017 tax cuts is, in effect, a massive tax increase that threatens to roil the U.S. economy.

Trump advisers have taken to the airwaves to try to calm the markets and soothe investors’ fears, including Kevin Hassett, a top economic adviser, who insisted that the administration was using tariffs to win "a drug war, not a trade war," with Canada and Mexico.

Commerce Secretary Howard Lutnick similarly tried to steady the waters, saying on Meet the Press on Sunday that tariffs would help “grow our economy in a way we’ve never grown before” and that Americans should not be preparing for a recession.

But that message belies another view within the administration — held by White House trade adviser Peter Navarro and others — that tariffs are not just a means to an end to exact policy promises from other countries but are an important tool for protecting domestic industry.

That position is best reflected in Trump’s promise to enact reciprocal tariffs on all countries starting April 2, which has remained unchanged despite the economic upheaval.

By Sunday night, Trump was back to telegraphing optimism about the tariffs.

“I think the tariffs are going to be the greatest thing we've ever done as a country,” Trump told reporters on Air Force One. “It's going to make our country rich again.”

At the same time, the Federal Reserve isn’t rushing to cut interest rates as it waits to see how Trump’s tariff promises play out. Fed chair Jay Powell said at a conference in New York on Friday that the U.S. central bank is also waiting to see how the administration’s immigration, fiscal and regulatory policies play out.

“The economy is fine. It doesn't need us to do anything, really,” Powell said.

Economists at Bank of America say that the odds of stagflation — which refers to the politically toxic combination of elevated inflation and more limited economic growth — have jumped. While that isn't their most likely scenario, the "soft landing" many had hoped for "seems unlikely in the near term."

"Weak survey data, soft consumer spending, large tariff increases, and Department of Government Efficiency (DOGE) cuts have weighed on the growth outlook in recent weeks," Candace Browning, the head of BofA Global Research, wrote in a research note on Sunday.

The person close to the administration said all the hope that businesses had upon Trump taking office — evidenced by the markets rallying post-election — is now gone. And unlike the first administration, the person said, there is no one making sure that Trump has daily time with CEOs who can underscore how dire the economic situation is.

“I get calls from CEOs every day saying, ‘How do we get in to talk to him?’” the person said.