U.S. President Donald Trump received a piece of good news Wednesday morning, when the Labor Department reported a lower-than-expected annualized inflation rate of 2.8% for February.
It was a bright spot in a week that had seen stock market turmoil in response to the escalation of a potentially damaging trade war and continued uncertainty about the administration’s ongoing effort to slash the federal workforce.
At one point on Tuesday, the S&P 500 stock index had fallen by 10% since hitting an all-time high in February — a decline that would have qualified as a market “correction” had it not recovered slightly before the end of the day. The index was up slightly on Wednesday afternoon but off 8.8% from last month’s high.
Economists warned that the positive inflation news may be a temporary respite. Since the beginning of March, Trump has imposed additional tariffs of 10% on Chinese goods, tariffs as high as 25% on many goods imported from Mexico and Canada, and an across-the-board tariff of 25% on steel and aluminum. The impact of those moves was not reflected in the numbers released Wednesday.
Also not reflected was the pledge from the European Union and other countries to impose retaliatory tariffs on U.S. goods, which would make it harder for American manufacturers to sell their products outside the domestic market.
Strong medicine
Trump has occasionally acknowledged his policies may cause short-term economic disruption and pain but has insisted they will lead to greater prosperity that will benefit all Americans.
At an appearance before the Business Roundtable in Washington on Tuesday, he insisted that manufacturing firms are already scouting new U.S. locations so they can move operations and avoid tariffs.
“They’re looking all over the place for places. … And also, very importantly, the tariffs are — they don’t want to pay 25% or whatever it may be, it may go up higher,” the president said.
At a separate event at the White House on Tuesday, Trump was asked about Americans who might be concerned that a tanking stock market had damaged their retirement savings.
“Markets, they’re going to go up, they’re going to go down, but you know what? We have to rebuild our country,” Trump said.
“Our country had to do this,” he said. “We had to go and do this. Other countries have taken away our business, taken away our jobs.”
Deregulation and ‘tax cuts’
Mary Lovely, a senior fellow with the Peterson Institute for International Economics, said economists will be closely watching certain factors for clues about where the economy is headed in the coming months.
The Trump administration has signaled that it wants to enact sweeping deregulation on some industries, which could boost certain sectors of the economy and help lower prices.
“This is something that a lot of companies say is going to offset the cost, but it