I was wrong about Trump’s tariffs. His economy is purring along | Opinion

In April, I wrote that I saw a recession on the way because “Trump has assembled the worst collection of ill-considered economic plans of any president since Richard Nixon birthed stagflation in the 1970s.”

I still think a recession is a big risk in the months to come, but the news Wednesday is not what I expected. As The Wall Street Journal reported, the U.S. economy grew at 3% in the second quarter. That’s a solid performance achieved even in the headwinds of U.S. companies drawing down their inventories to avoid high tariffs.

There are three reasons that Trumponomics is delivering growth in the short term and might even be able to pull it off in the longer term.

• Trump’s chaotic approach to trade deals, announcing brutal tariff rates and then fudging deadlines and backing away before sometimes coming to a deal both countries can live with has, weirdly, become predictable. Policy chaos can be as damaging to the economy as bad policies, but I did not forsee the way markets have been able to adapt.
• Trump is coming through with some big deal agreements that are leveling the playing field in ways that his proponents predicted, but that I only had faint hopes he would achieve. This week’s deal for 15% tariffs on Europe and no European retaliation is a big deal. A week ago, Trump announced a similar agreement with Japan, another key ally and big trading partner
• Trump got his One Big Beautiful Bill through Congress, and it has three big features that are good for growth. Two are long term and one is short term and could later blow up on us. In the long term, making Trump’s low income tax rates permanent takes uncertainty out of the economy and replaces it with strong incentives for growth. Another feature of the bill’s tax rules is a generous change to deductions for companies that make things in America and sell a lot overseas. That could bolster investment in the United States in ways that build on Trump’s trade deals.

The short term feature of the OBBB that could come to backfire on us is the gusher of deficit spending it plans for the coming years. There is little sign of the big deficit reduction Trump promised and that DOGE seemed to be setting the stage for. That is good for growth now, but it sets up a conflict with the bond market and doubts that the U.S. can pay the interest increase with it. That can impact the interest rates businesses pay to invest and consumers pay for putting their purchases on credit.

At the same time, new numbers show that core inflation is continuing at a 2.5% rate, above the Federal Reserve’s target of 2%. That means at the Fed’s meeting that ends Wednesday, the bank won’t be announcing the interest rate cuts that Trump has been pushing for.

Trump was hoping that he could buffalo the fed into easing rates as a way to prop up the economy for the rest of the year. That’s not going to happen.

Which gets us to the next danger for the U.S. economy that could tip us into recession later this year.

So far, according to the new economic data released on Wednesday, the U.S. economy has successfully dodged the cost of Trump’s tariffs. Businesses did this by front-loading imports into the first quarter and slowing imports in the second quarter by selling all the goods they imported earlier and drawing down their inventories.

That’s less of an option now. Going forward, businesses are going to have to import both final products they sell and some of the resources they use to build things in the United States (think steel, auto parts and raw materials). That means paying the sky high tariffs Trump has imposed on China, as well as high rates on imports from the countries that have yet to make a deal with Trump, like the 25% India tariffs Trump announced this morning.

I am all for giving Trump his due. His economy is running much better than I thought it would be a few months ago, but the danger I was pointing out is far from over.

David Mastio is a national opinion writer for McClatchy and the Kansas City Star.

This story was originally published July 30, 2025 at 11:37 AM with the headline "I was wrong about Trump’s tariffs. His economy is purring along | Opinion."