It usually takes years for a president to leave his mark on the economy. Donald Trump has done it in just a few weeks. His plan to raise tariffs on Canada, Mexico and China has rattled markets and boardrooms. Some businesses are seeing signs that deportations could affect their workforces. More than 40,000 federal employees are preparing to resign and others are rethinking their futures under pressure from Elon Musk and his Department of Government Efficiency.
At the same time, President Trump’s pro-business, pro-fossil fuel agenda has excited many businesses who have made multibillion-dollar investment announcements.
The end goal seems to be an economy with a smaller role for imports, immigrants and the federal government and a bigger one for private investment. But the execution has generated intense uncertainty—among business owners, workers and trade partners—that could damp growth, at least temporarily.
While Trump’s election was fueled in part by voter concerns about inflation and standards of living, he nonetheless inherited a solid economy. Gross domestic product was up 2.5% from a year earlier in the fourth quarter, and Friday’s employment report from the Labor Department showed that the economy added 143,000 jobs in January while the unemployment rate ticked down to a low 4%. Inflation has fallen sharply from its 9% peak in 2022, though is still closer to 3% than the Federal Reserve’s 2% target.
Many firms are bullish about Trump’s presidency, with surveys of chief executives, chief financial officers and small-business owners after the election showing notable increases in optimism. The Institute for Supply Management reported earlier this month that its index of manufacturers’ new orders in January rose to the highest in nearly three years.
But events since the inauguration have dented that optimism. The S&P 500 rose 5% in the first five days after the election and has since moved sideways. The University of Michigan on Friday said its preliminary index of consumer sentiment, based on surveys conducted since Trump’s inauguration, dropped in February. Preliminary results of a small business survey by Vistage Worldwide for The Wall Street Journal show that a postelection pop in confidence was reversed in February. Wall Street just ended the quietest January in a decade for mergers and acquisitions announcements.
Ethan Karp, chief executive of Magnet, a nonprofit in Cleveland that works with local manufacturers, said, “There is so much turmoil. People don’t know what is going to land. Even though there is potential long term benefit to the tariffs in terms of reshoring, the immediate things that are happening is just turmoil.”
Tariff uncertainty
Though Trump campaigned on higher tariffs, it still came as a shock when on Feb. 1 he announced duties of 25% on Canada and Mexico, 10% on Canadian energy, and 10% on China.
The next day, some residents in New England got a notice from Irving Energy, which is based in Canada, saying “the U.S. government has announced a new tariff (a tax) on imports from Canada,” including on heating oil and propane, and that the tariff would be added to customer contracts.
Two days after his announcement, Trump paused the 25% tariffs on Canada and Mexico for 30 days, but kept the tariffs on China.
This past Friday, Trump said he wanted “reciprocity”—matching U.S. tariffs to those of its trading partners. Monday, he announced 25% tariffs on imported steel and aluminum.
Small and large businesses alike are trying to respond, but are hampered by not knowing the ultimate endgame.
Alicia Chong, owner of Blu Monaco, an online retailer of decorative office supplies and stationery based in Warminster, Penn., has asked some of her Chinese manufacturers for a 10% discount to offset the cost of higher tariffs. “If that does not work, I’m going to increase [prices] 5% across the board,” said Chong.
The first factory to respond said it would consider lowering its price, but only if the company increased the size of its order. Chong said she is reluctant to do that because having too much stock puts pressure on Blu Monaco’s cash flow.
Chong also plans to look for alternative suppliers in Vietnam, which could take six to nine months, she said. “The existing factory has all my designs,” said Chong. Finding a new factory “is like starting a new relationship,” she said.
Chong said she is also worried that Trump could also impose tariffs on Vietnam. “That’s why I am not in a rush,” she said. “He will probably look at this again in six months.”
In just the first week of February, the word “tariff” appeared in 172 earnings call transcripts of 1,500 publicly listed U.S. companies, according to FactSet, compared with 32 in all of February last year.
An index of policy uncertainty based on news articles, co-developed by Nick Bloom, a Stanford University economist, has reached levels last seen during the pandemic and in the wake of the 2008 financial crisis. Uncertainty can hamper long-term investment such as in research and development and infrastructure, Bloom said.
At a conference of aerospace suppliers last week, consultant Richard Aboulafia, managing director of AeroDynamic Advisory, joked, “Thank God we have a stable political and regulatory environment to help us through these difficult times,” to laughter. He said the industry anticipated a trade war with China but was blindsided by the tariffs on Canada and Mexico. “It’s just kind of bizarre.”
When Wyoming Machine, a sheet metal fabricator in Stacy, Minn., met with a large customer this week, President Trump’s plan to impose tariffs on Canadian imports was a subject of discussion.
Traci Tapani, co-president of the 45-person company, which purchases aluminum from Canada, said the repeated changes in tariff policy have made it more difficult for her company to operate.
“There is a lot of uncertainty in business no matter what we do,” she said. “The President going back and forth every few days about what is going to happen with these tariffs is not helpful.”
Tariffs alone aren’t enough to bring back manufacturing to the U.S., said Tapani, adding that the country also needs to focus on initiatives such as workforce development.
For now, her company has held back on investment and hiring. “We aren’t going to jump out and make any big decisions or big plans” until there is more certainty, Tapani said.
Still, the U.S. economy has a record of resilience. In his first term Trump imposed tariffs on washing machines, solar panels, steel and aluminum and most imports from China. The economy still grew solidly up until the pandemic hit, and inflation stayed low.
And some executives praised Trump’s focus on boosting American manufacturing. Mark J. Costa, chief executive of Eastman Chemical, told analysts that focus is “incredibly important. I think a lot of us forget that you don’t really actually have an economy without an industrial base.”
Immigration concerns
Immigration, much of it illegal, contributed significantly to labor force growth and to some companies’ sales in recent years. But migrant entries slowed sharply last year, and Trump launched a major deportation effort upon taking office. That’s changing behavior in ways that could ripple through the economy.
Business owners in some immigrant-heavy neighborhoods say they have seen a noticeable drop in foot traffic, especially following law-enforcement activity of any type.
“As soon as the guy became president, everyone just stopped doing what they do every day,” said Adam Chavez, who runs an auto-parts store in south-central Los Angeles. “It’s crazy, man.”
Chavez, 51, said walk-in customers who work on their own cars have been conspicuously absent since Trump’s inauguration. Demand from mechanic shops, meanwhile, has remained steady.
Chavez said his mother, afraid of being hassled by immigration authorities, is afraid to leave the house even though she’s a U.S. citizen. “I’m like, ‘Ma, no one’s going to catch you,’” Chavez said. “She’s scared.”
Miguel Alfaro, who owns a Mexican restaurant in Los Angeles with his wife, said his sales have dropped roughly 50% since Trump took office. “There’s less movement in the streets,” he said. “I hope to God we can stay open because I invested a lot of money in this, our savings.”
In the farming region around Bakersfield, Calif., some citrus growers reported a 75% drop in people showing up to work following a U.S. Border Patrol sting in early January, before Trump took office, said Casey Creamer, president of California Citrus Mutual, which represents three-fourths of the state’s growers. While the situation has since returned to normal, he said it underscores the potential for disruptions.
There were 13.7 million unauthorized immigrants living in the U.S. in mid-2023, according to new estimates from the Migration Policy Institute, equal to about 4% of the total U.S. population. Millions more live in households with legal immigrants or citizens.
Trump’s plans involve both sending home many migrants already here, and slowing the inflow of new arrivals. The plan, aimed at restoring control over the border and reducing crime and drugs, is popular among voters unhappy with the surge in unauthorized migrants under Biden, not just into border states but northern cities.
Still, it’s likely to have economic repercussions, including exacerbating labor shortages. In a recent survey, members of the Associated General Contractors of America listed an insufficient supply of workers as one of their top concerns for 2025. Members in Florida, Georgia, Texas and Oklahoma, among other locations, have reported workers not showing up “because of rumors or fears of potential ICE raids,” said spokesman Brian Turmail.
Federal cuts
The federal government has a huge economic footprint, with total civilian employment, excluding postal workers, of 2.4 million, about 1.5% of all nonfarm jobs. It also spent $6.75 trillion in the most recent fiscal year, equal to nearly a quarter of annual economic output.
In a few weeks, the Trump administration has moved to trim personnel through executive actions and by dismantling agencies. It has collected tens of thousands of resignations as part of a buyout plan, following the purge of diversity, equity and inclusion staff as well as other reductions. The Trump administration is working to dismantle USAID, a 10,000-person, $44 billion agency.
Workforce reductions may have a longer-lasting effect. They may raise regional unemployment rates, particularly around Washington, D.C. and smaller metro areas dependent on military bases or health centers, an analysis by Jonathan Schwabish of the Urban Institute found. Should the Trump administration move up to 100,000 positions outside of Washington—a campaign pledge—“that would be an economic disaster” for the D.C., Maryland and Virginia area, said Sen. Tim Kaine (D-Va.).
Nicholas Lawless, 39, who works for the Department of Homeland Security’s Office of the Inspector General, was approved to work remotely from Sayre, Penn., in 2022. When Trump pushed to have the federal workforce return to full-time in-person work immediately, Lawless decided to resign from his position and take a buyout. He said he is going to try to expand a security company that he owns instead of looking for a job, unsure if he could find a position in a tough white-collar labor market.
“With this influx after today of government employees, it’s just going to get worse,” he said.
The cuts announced so far are unlikely to make much dent in overall spending or the economy. USAID’s entire budget equals less than 1% of federal spending. Trump has made the biggest items—Social Security, Medicare, defense and interest on the debt—effectively off limits, and Republicans in Congress plan large new outlays on security and national defense.
Trump has targeted cutting 10% of the total federal workforce, or 240,000. That’s less than 5% of the number of people who quit or lose their jobs each month. Many will retire, or find new jobs. Indeed, some private-sector companies see this as a chance to snap up talent, said Victor Hoskins, president and chief executive of the Fairfax County Economic Development Authority.
At a recent two-day hiring event in Northern Virginia, he said, employers were advertising about 10,000 open jobs in fields like cybersecurity, healthcare and aerospace, and roughly 1,000 people showed up.
“If there is a labor supply that is talented and available, it will be picked up,” Hoskins said.
Shannon Russo, chief executive of Kinetix, an outsourced recruiting firm based in Atlanta, believes the Trump administration’s “America-first” policies will boost the hiring needs of small- and medium-size firms working outside the government sector.
‘There’s a lot of noise currently, but as more people feel stable they will be making investments, which is why I am going to be able to make investments,” said Russo. She currently has 65 employees and hopes to double the firm’s size by the end of 2025. Clients are now setting up meetings to talk about hiring, after being unwilling to do so last year, she said.
Energy optimism
Trump’s election brought hopes of a boom in investment driven by cheaper energy, deregulation, lower taxes and reshoring. The day after Trump’s inauguration, some of the world’s most prominent names in technology pledged to invest up to a half a trillion dollars into building artificial-intelligence infrastructure in the U.S.
Trump’s support for fossil fuels has boosted natural gas as a more palatable answer to AI’s voracious need for power. Duos Technologies in Jacksonville, which makes tools to automatically inspect railcars, in recent months expanded into digital infrastructure needed in part for the AI boom.
It joined with outside investors in January to manage a fleet of 30 mobile natural-gas turbines that data centers operators nationwide can rent while they secure longer-term electricity deals. At the same time, Duos has deployed six so-called edge data centers, tiny server farms that can be shipped via semitrailer from a factory in Colorado to largely unconnected rural areas in Texas and elsewhere.
The company has a pipeline of 50 such data centers in the works, Chief Executive Chuck Ferry said. “We’ve got some whales who may ask for even more than that.”
Easier regulations for energy projects and other development could help Duos develop larger data-center and power projects down the line.
“I think most business leaders…are actually pretty happy that this administration is in place now versus the one that could have been,” Ferry said.
