Trump is entitled to disagree publicly with economists who don’t share his belief in his tariff strategy. But calling for their dismissal crosses a line.
Displeased by some negative revisions of jobs data, the president recently fired Erika McEntarfer, the commissioner of the Bureau of Labor Statistics, claiming (without any obvious facts to back him up) on Truth Social that the “Jobs Numbers were RIGGED in order to make the Republicans, and ME, look bad.”
It was not only a bad move on the merits, but also because of the consequences. If Uncle Sam’s lenders come to think that this country’s economic data is subject (or might be subject) to political interference, that increases the chance that they will charge the U.S. higher interest rates than would otherwise be the case. Given the size of our debt, that could be very expensive.
The BLS also calculates the country’s official inflation data, making a later intervention by Trump even more unfortunate and unwise.
President Trump on Tuesday appeared to call for Goldman Sachs Chief Executive David Solomon to replace the bank’s top economist over his past predictions, in his latest broadside against executives he believes are undermining his goals.
Trump said on his Truth Social social-media platform that Solomon should “go out and get himself a new Economist” because the bank made a “bad prediction a long time ago” on the market and tariffs. The president asserted that tariffs haven’t caused inflation or other issues for the U.S. economy.
The president’s assertions are, to say the least, questionable. His higher tariffs have already been associated with price rises (which, critically, may feed into higher inflationary expectations) and may be hitting the economy (thus the focus on the jobs numbers).
Overall, however, it is way too soon to quantify the effects of the Trump tariffs, not least because they have been in a state of flux. What is more, the obvious sensitivity of the administration to bad news is not only a bad look but illogical. The switch to a high tariff regime has been sold as a cure for much of what (supposedly) ails the U.S. economy. Cures often come with side-effects.
As I noted in the most recent Capital Letter:
The administration has previously conceded that higher tariffs might involve (temporarily) higher prices en route to the Golden Age. By extension, the same could be true of all those golden jobs. It would have been easy enough to argue that the disappointing manufacturing jobs were just a blip as the country headed toward the golden uplands.
Under the circumstances, taking aim at the now former BLS chief looked like an overreaction, hardly the way to reassure markets.
The same can be said of the president’s attack on Goldman’s economist, who Trump did not name, although he was presumably referring to Jan Hatzius, the firm’s chief economist.
And what can have led to Trump’s anger?
Well, the Wall Street Journal’s report also includes this:
Hatzius and his team have been among the many economists who have predicted tariff policies would dent labor markets, cause higher inflation and slow U.S. economic growth.
A report by Hatzius and his team Sunday included an analysis that found U.S. consumers had absorbed 22% of tariff costs through June, but will eventually absorb 67% if recent tariffs follow the same pattern as earlier tariffs. This assessment is similar to those of other economists.
U.S. businesses have shouldered much of the tariff burden so far. In the latest round of earnings reports, companies such as Ford and General Motors reported big hits to the bottom line because of the effects of tariffs. But economists widely expect the burden to shift to U.S. consumers and, to a lesser extent, foreign governments, over time.
Trump said in his post that consumers, for the most part, aren’t paying the tariffs but rather it is “mostly Companies and Governments, many of them Foreign, picking up the tabs.”
Hmm. . . .
The president is entitled to disagree publicly with economists who do not share his belief in his tariff strategy. But calling for their dismissal crosses some sort of line. Goldman’s economist works for his employer (and thus for its shareholders), not for an administration that can occasionally give off more than a whiff of corporatism. Moreover, that economist and his team are meant to be giving the best advice they can to his company’s clients. They are not meant to be flacks for whoever is in the White House at the time.
Tactically, attacking Hatzius in this way is also a blunder. It looks weak, not strong, and hints at a lack of confidence in the high tariff strategy at a time when the administration needs to convey the opposite.