Prior to the inauguration of President Donald Trump, Treasury Secretary Scott Bessent put forward the 3-3-3 policy agenda for the new administration.

He said that Trump’s policies would create the conditions for 3% GDP growth, a deficit reduction path so that in four years the federal deficit would fall from the current range of 6% to 7% of GDP to 3% of GDP, and pro-energy policies which would cause domestic oil production to increase by 3 million barrels a day. Today, not one of these policy goals seems remotely plausible. Because of Trump’s policies, the risk of a recession is rising. The federal deficit is increasing, and domestic oil companies are preparing to cut production. 

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This week, Bessent put forward a new economic program that involves three major platforms: tariffs, taxes, and deregulation. Bessent now says that Trump’s policies will lead to 3% GDP growth beginning in the summer of 2026. He believes that Trump’s tariffs will persuade domestic manufacturers to invest more in U.S. production. And that tariffs will cajole non-U.S. companies to produce more in the U.S. and reduce their exports into the U.S. This will have the effects of a more robust domestic manufacturing sector and a reduction in the trade deficit.

Bessent also argues that the Republican Reconciliation bill will include tax policies that will stimulate domestic investment and provide the basis for sustained, strong economic growth. The third leg of Bessent’s new economic theme is deregulation. He says that through comprehensive deregulation, the conditions for strong future economic growth will be firmly in place.

Economic realities do not support Bessent’s claims.

For a start, it is manifestly clear that tariffs will reduce economic growth. This week, both Ford and GM, the two pillars of the domestic automotive industry, said Trump’s tariffs are causing billions of dollars in losses. And the leading U.S. steel producer, Nucor, is complaining that the tariffs are hurting its business operations. Economic growth in the U.S. will also suffer because countries that are subject to Trump’s tariffs will respond with counter-tariffs. The European Union is preparing tariffs of $110 billion. And China has reduced imports from the U.S. by up to 40%. The U.S. agriculture industry is being hit hard. 

Yes, tariffs may persuade certain manufacturers to increase domestic investment. But for most manufacturers, Trump’s tariffs are creating too much uncertainty to make new investments in domestic manufacturing capacity. When uncertainty is elevated, businesses wait for more information. This is economics 101, and it is happening right now. Capital spending plans are on hold or falling. 

What about Bessent’s promises of a cornucopia of new manufacturing jobs?

The problem here is that the economy is already at what is effectively full employment. Already, there is an acute shortage of labor in the manufacturing sector. Employers can’t find workers. Trump’s policies will just exacerbate the labor shortage in the domestic manufacturing economy. 

The Republican Reconciliation bill will almost certainly be passed. The bill will extend the income tax cuts from the 2017 Tax Cuts and Jobs Act. But most taxpayers will not benefit from the reconciliation bill. There are no new tax cuts for most households. Only a small percentage of the workforce will benefit from no taxes on tips and no taxes on overtime.

It is true that the manufacturing sector will benefit from the reconciliation proposal that new investments in machinery and manufacturing infrastructure would be immediately tax deductible. But will businesses invest when uncertainty is so high and when the economy is at risk of falling into a recession? 

Most importantly, what Bessent and Trump do not disclose is that the Republican reconciliation bill will increase the federal deficit and put upward pressure on interest rates. Higher interest rates will curb investment and household consumption. 

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The administration’s ideas for deregulation are positive, but implementation of deregulation policies to reduce red tape, which slows economic growth and innovation, will take time. Inevitably, there will be legal challenges to deregulation. After all, the provisions of the Administrative Procedure Act of 1946 must be followed. 

Bessent’s three-pronged strategy involving tariffs, taxes, and deregulation is mostly political hot air. The policies of Trump’s first one hundred days are increasing the deficit, slowing the economy, and causing a crown jewel of the economy, the oil industry, to reduce production. Bessent’s ideas are mostly fantasy. 

James Rogan is a former U.S. foreign service officer who has worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be reached at [email protected].