I'm no financial expert, but it seems like while the financial markets and economic commentators are taking into account the effects of the Trump tariffs (including the uncertainty from the on-again-off-again tariffs and tariff threats), they are completely ignoring the downstream effects of the Trump/Doge spending freezes and layoffs.
The freeze and end of government grants will and in some cases already have had a devastating effect on the biomedical, health care, higher education, and non-profit sectors of the economy. The end of USAID and the cut off of military aide to Ukraine is a serious blow to American agriculture and the defense contractors.1 Cuts to education funding mean local schools across the country will have to cut special ed programs and/or raise property taxes to make up the difference. Cancelled government contracts means the losses of private-sector jobs, which is on top of the tens of thousands of federal job losses, and countless state and local government job losses from cut off federal grants. All of those newly unemployed people and people employed by de-funded private businesses are going to cut back on their own spending, which will depress consumer behavior. On the whole, I think these downstream effects are going to have a much greater effect than the tariffs and they are the reason I think the U.S. is heading into a major economic downturn, at the same time that Elon is attacking the social safety net designed to make mass unemployment easier on the people involved.
While every tariff announcement causes the stock market into a new spiral, none of those other announcements have had that effect, and the financial media doesn't seem to be paying any attention to how those things will effect their precious stocks once entire industries start going under. The biomedical industry, for example, is almost entirely supported by NIH grants. The Trump administration has effectively dismantled the mechanism for awarding new grants while freezing many already approved grants. The American biomed, a giant industry that puts a ton of money into the economy and I am sure ultimately produces far more tax revenue than the cost of the grants that support them, is going to die or flee to other countries. Even after the Trump/Musk madness passes (assuming it does) we may never fully get that industry back.
I don't understand why that is not a bigger story than the tariffs.
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1-In most cases the "aid" sent abroad was actually the U.S. paying domestic producers for the product that was sent as aid. So when you read that the U.S. "sends $100 billion to Ukraine" in military aid, it does not mean the U.S. is sending all that money to Ukraine. Most of the money is sent to U.S. weapons manufacturers to pay for weapon systems or ammunition, which is then donated to Ukraine. So the money is actually invested directly into the U.S. economy and supports jobs in the U.S. Food aid works in a similar way as a stealth agricultural subsidy)
1-In most cases the "aid" sent abroad was actually the U.S. paying domestic producers for the product that was sent as aid. So when you read that the U.S. "sends $100 billion to Ukraine" in military aid, it does not mean the U.S. is sending all that money to Ukraine. Most of the money is sent to U.S. weapons manufacturers to pay for weapon systems or ammunition, which is then donated to Ukraine. So the money is actually invested directly into the U.S. economy and supports jobs in the U.S. Food aid works in a similar way as a stealth agricultural subsidy)
