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Robert Burgess is the executive editor of Bloomberg Opinion. Previously, he was the global executive editor in charge of financial markets for Bloomberg News.
Listening to former President Donald Trump speak to the Economic Club of New York, you could be forgiven for thinking that the economy has been such a disaster since he left office that the stock market is in a perpetual free fall. And yet, the benchmark S&P 500 Index is up 64 percent since the 2020 election through Wednesday, topping the 60 percent gain at the same point in the Trump administration.
There’s an old saying that the stock market is not the economy, and that’s true in the short run. Over the long run, stocks do reflect economic fundamentals, and the evidence shows that investors like the policies of President Joe Biden more than those that Trump offered up when he occupied the White House from 2017 through 2020. And yet, in laying out his economic agenda on Thursday, Trump doubled down on the chief policies of his administration — mostly tariffs and lower corporate taxes.
In Trump’s telling, he succeeded in making America great again. The reality is that the tariffs he imposed on China and other countries damaged U.S. manufacturers. And big companies used the money from lower corporate tax rates not to invest in and innovate their businesses but rather to buy back their own stock and pay dividends to shareholders — all while denying the U.S. much needed revenue and causing its debt load to blow out 16 percent to $23.2 trillion by the end of 2019.
That explains why consensus was building heading into the last year of Trump’s presidency that the economy was struggling. The odds of a recession in the following 12 months doubled to 35 percent toward the end of 2019 — well before COVID-19 showed up on anyone’s radar — from 15 percent in 2018, according to data compiled by Bloomberg. Analysts were busy slashing their growth forecasts as employers added less than 2 million jobs in 2019, the fewest since 2010. By way of comparison, the economy has already added 1.42 million jobs this year through July on top of the 3.01 million added in 2023, which was 703,000 more than Trump’s best year leading the country.
And, no, Trump’s tariffs didn’t improve the fortunes of U.S. manufacturers. In fact, the Institute for Supply Management’s widely watched index of manufacturing activity cratered starting in mid-2018 all the way through 2019. Things got so bad for manufacturers that the ISM’s index suggested the sector was in a recession in the final four months of 2019. And yet, Trump says he wants to impose a 10 percent across-the-board tariff on all imports and 60 percent duties on Chinese goods if he wins reelection, casting the idea as a “pro-American trade policy that uses tariffs to encourage production here.”
But that didn’t happen the first time around, so why would anyone expect it to happen now? The reality is that it takes more than tariffs to encourage manufacturers to bring more production back home — something Biden and Vice President Kamala Harris have figured out. Their signature pieces of economic legislation — the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the Chips and Science Act — have, in the words of Apollo Global Management’s chief economist, Torsten Slok, helped to trigger “a new industrial renaissance” with “U.S. manufacturing capacity … now growing after having declined for many decades.”
Investors not just in the U.S. but around the world recognize this renaissance, which is why they are pouring money hand over fist into American assets. After sliding from 65.4 percent when Trump took office to 58.9 percent when he left, the dollar’s share of global currency reserves has stabilized under the Biden administration. Foreign holdings of U.S. Treasury securities have surged by $1.14 trillion since the end of 2020 through June, better than the $1.07 trillion under all four years of Trump.
In the stock market, which Trump often held up as the ultimate arbiter of the job he was doing, investors value U.S. stocks much more highly now than under his watch, not just on absolute basis but on a relative basis to the rest of the world as well as by price-earnings ratio.
Trump was largely elected in 2016 by frustrated Americans who wanted a president who could disrupt the status quo and bring fresh ideas to Washington. But listening to his plans for the economy, it’s clear that they have just grown stale.
