This is all just so damn frustrating and disheartening...

The Trump administration is tripling down on an agenda that's horribly unpopular for good reasons. And they don't seem to be able to stop.

Sorry—I don’t mean to be downbeat, but I’m just increasingly worried about where we are and where we’re headed re economic policy. None of this is a surprise, of course, except the administration’s apparent lack of reaction to markets and public opinion. Trump 1 was actually fairly elastic to those forces, which was why many of us thought markets could still play a disciplining force. Markets are rallying today, so there’s that, but new information on consumer sentiment is flashing red.

We should be careful not to over-torque on the preliminary UMich sentiment data out this morning for the first half of March, but there’s a signal in there that we’d be foolish to ignore. Consumer sentiment fell sharply to a 29 month low; expectations about the future economy fell 15%, its largest decline since the pandemic. UMich results often reflect more political partisanship than economic vibes, which is why the figure below is so revealing. Even Rs and independents are worried. Inflation expectations also popped up again, and did so “across all three political affiliations.”

And, of course, it’s not just consumers. Though the market’s rallying nicely this morning, the trend difference between Trump 1 and Trump 2 is stark.

Source: NY Times.

I’ve written extensively about the pervasive unpopularity about the administration’s economic agenda, focusing mostly on tariffs and less on DOGE, though both are in the mix, especially as federal government layoffs grow. Remember, these jobs exist all over the country (just 20% reside in the DC area).

At this point, members of the administration from Trump on down cannot ignore the negative vibes their actions are generating, but they clearly believe that great things await us on the other side. Commerce Sec’y Lutnick went as far as to suggest that if their policies do cause a recession, it will be “worth it.”

This, to me, is the most worrisome recent development. It suggest precisely what we’re seeing: an intentional ignoring of remarkably clear and remarkably quickly developing animosity towards their agenda, one that’s spread from the usual Trump-critical-sources to the Wall St. Journal and even Fox News.

This is starting to look uncomfortably close to the behavior of a gambler or addict who believes that one more pull of the slot machine will deliver the jackpot.

What about the possibility that they’re right and the rest of us are wrong? It’s an important and legitimate question.

But what do we mean by “right?” They’ve been clear that when it comes to the tariffs, the current pain is intended to yield re-industrialization gain. It is, they believe (or they say they believe), going to lead to factories picking up from where they are across the world and relocating here in the U.S.

Dean Baker and I will have more to say about this soon, but I know of no example in at least the last century that would suggest sweeping tariffs will have this effect. There is, however, a strong counterexample: the German experience.

The administration believes that tariffs will lead to balanced trade, perhaps even a surplus. And because for them the trade deficit is scorecard, full stop, they believe that balanced trade translates in manufacturing jobs. But check out this figure:

Germany, long view as a manufacturing powerhouse, has had both persistent trade surpluses and a declining share of manufacturing employment.

That one figure, by itself, doesn’t disprove the possibility of re-industrialization. In fact, it does show a slower deceleration of the factory employment share when the trade balance turned positive. The U.S. case is also instructive in this regard: manufacturing employment actually held roughly steady in raw number terms (obviously, falling as a share of total employment) from around the 1980s to the 2000s, before getting slammed by China’s import penetration and the ensuing China Shock.

But a declining share of factory employment should firmly be expected in any advanced economy, even one with a persistently positive trade balance.

And then there’s the fact that a) 45% of our imports are inputs into our own domestic production, b) retaliation as the trade war escalates pushes the wrong way on re-industrialization, and c) Canada, Mexico, China and everybody else want to keep their factories right where they are, thank you.

I’m not sure what it will take for the Trump administration to recognize these realities, but at least so far, tanking markets and consumer and business confidence isn’t doing it.