The aggressive tariff measures enacted during President Donald Trump’s tenure have produced economic results that defy the predictions of many mainstream economists, according to Lou Basenese, Chief Market Strategist at The Basenese Group. Basenese emphasized that the administration’s immediate application of substantial tariffs—reaching up to 83%—served as a powerful stimulus to bring major U.S. trading partners to the negotiation table.
Basenese pointed out on Fox Business’ "Kudlow" that while the scale of these tariffs was substantial, the anticipated inflationary pressures did not materialize as economists had expected. He attributed this surprising outcome partly to deflationary influences stemming from deregulation policies and technological advancements in artificial intelligence, which together helped to counterbalance the expected cost increases from tariffs.
Highlighting the economic performance in the third quarter, Basenese noted that the U.S. economy achieved a robust 4.3% growth in gross domestic product (GDP), surpassing consensus estimates of 3.3% and exceeding the Federal Reserve's projection of 1.6%. He underscored this discrepancy by stating, "You cannot argue with the results," indicating that actual economic indicators diverged significantly from expert forecasts.
Looking ahead, Basenese suggested that the real estate sector might serve as a catalyst for even stronger economic growth in the upcoming year. During the third quarter, real estate had acted as a slight drag on GDP growth, contributing a negative 0.2%. However, he expressed confidence that if real estate activity were to rebound under current policies, the economy could potentially reach a 5% growth rate. He drew a historical parallel, noting that such a level of sustained strong growth has not been seen since the era of President Ronald Reagan, over thirty years ago.
Despite this optimistic outlook from Basenese, some economists remain skeptical. David Rosenberg, of Rosenberg Research, has criticized the reported GDP growth figures as misleading. He described the headline growth rate as "fugazi," suggesting that the true growth rate stands at a more modest 0.8%. Rosenberg attributed the elevated GDP figure largely to increased government spending, a decrease in imports, and reduced personal savings during the same period.
In addition to challenging GDP numbers, Rosenberg also expressed doubts about recent inflation data, noting that if Consumer Price Index (CPI) figures had been manipulated, similar skepticism should apply to GDP reports. This concern was articulated in a social media post, reflecting a broader distrust among some economists regarding official economic statistics.
Furthermore, economist Paul Krugman pointed to a structural shift toward a K-shaped economy, whereby affluent segments continue to prosper while working-class families struggle. Krugman acknowledged President Trump’s claims about the U.S. being the "hottest country in the world" economically but emphasized that robust labor market conditions have not been sustained beyond 2023-24. He identified a stagnant job market as a major contributing factor, linking this stagnation to the unpredictability of tariff policies during Trump’s administration.
These differing perspectives underscore an ongoing debate surrounding the effects of tariff strategies and their broader implications for economic growth, inflation, and labor markets. While some analysts highlight data that suggests successful economic momentum, others question the accuracy and sustainability of these indicators, signaling potential uncertainties ahead.