Gene Sperling was director of the National Economic Council under Presidents Bill Clinton and Barack Obama and was a senior adviser to President Joe Biden.
The worst thing Trump is doing to the economy isn’t tariffs
Fidelity to blind justice and institutional integrity made the U.S. economy exceptional. No more.
June 16, 2025 The Washington Post
By Gene Sperling
A major component of this American economic exceptionalism has been our demonstrated fidelity to serious economic norms, nonpolitical economic institutions and the rule of law. These elements explain roughly 40 percent of the variation in average income across countries, according to research by Daron Acemoglu, Simon Johnson and James Robinson that won the 2024 Nobel Prize in economics.
While President Donald Trump’s tariffs, and his indifference to mounting deficits, are causing zigzags in the stock and bond markets, it is his disregard for rigorous economic decision-making and the rule of law that may create the most long-term damage to the country’s economic reputation.
Though raising tariffs to Smoot-Hawley levels would have always roiled markets, the madness of Trump’s method has signified to global markets that U.S. economic policy is not anchored in serious economic norms — that it is being conducted, in the words of Logan Roy of “Succession,” by “not serious people.” The Economist described Trump’s “Liberation Day” tariffs as “shambolic, incoherent” and “a mockery of policymaking.”
This was the clear market verdict, too. The weakening of equity markets, bond markets and the dollar after Trump’s announcement signified a flight from all U.S. assets — a financial pattern normally reserved for developing nations with shaky records on inflation.
This is far from a partisan charge. Kenneth Griffin, CEO of the hedge fund Citadel and a billionaire Republican donor who voted for Trump, has said that though the U.S. brand is unmatched, Trump’s policies “put that brand at risk” and that it could take “a lifetime to repair the damage.” Paul Singer, head of the hedge fund Elliott Management and a Republican megadonor, recently expressed fears that the unpredictability of Trump’s trade policies could cause “enormous” damage, spark capital flight and reduce the appeal of doing business in the United States.
Trump has backed off on some of his most extreme tariff threats, but his disregard for serious economic decision-making, independent economic institutions and the rule of law has continued. Trump’s social media post about 100 percent movie tariffs brought back the all-too-frequent spectacle of top economic advisers who are unable to answer even basic questions about presidential policy statements. The Trump White House often seems oblivious to even the most rudimentary economic realities — such as that mandating domestic production of all parts of products, from dolls to pickup trucks to iPhones, can make them unaffordable to consumers. Or that even plausible supply chain substitutions can take years to implement. Or that there is no economic or national security case for punishing imports of coffee beans, vanilla extract and bananas from lower-income nations.
Trump’s increasingly aggressive criticism of Fed Chair Jerome H. Powell has created harmful uncertainty about whether Powell’s eventual successor will operate with full independence — a pillar of American exceptionalism that has been found to lower our government’s borrowing costs. The White House is now engaging in unprecedented attacks on the credibility of the independent, nonpolitical Congressional Budget Office for daring to report that Trump’s One Big Beautiful Bill would increase deficits. And in August, Trump repeatedly and baselessly attacked the Bureau of Labor Statistics for “fraudulently manipulating job statistics,” when it was simply conducting standard benchmark adjustments. How many negative economic releases would Trump swallow before bulldozing career economists and statisticians and the integrity of U.S. data?
One reason the United States has long been a magnet for long-term investment is the knowledge that, though policies can change over time, our fidelity to blind justice, institutional integrity and the rule of law does not. No more.
Consider what a multinational CEO contemplating new production in the United States must consider: Will they be subject to lawless executive orders that cancel federal contracts based on political resentment? Will defying the whims of administration policy trigger the kind of relentless government attack now facing Harvard? Will refusing to let the White House dictate pricing and production choices lead to the president threatening a company-specific tariff rate — as we are now seeing with Apple? With Trump accepting a luxury plane from Qatar and openly hosting a “pay to play” dinner for a family-owned company, will what Griffin called a “terrifying” swift rise of “crony capitalism” mean subtle or even coercive pressure to enrich the president’s family? With the president suggesting he’s willing to flout the law and have the IRS revoke the tax-exempt status of certain U.S. institutions — and with a House reconciliation bill that would allow the president the power to raise taxes by 5 to 20 percentage points on foreign investors if he finds their home country has engaged in “discriminatory” taxes — will any company with foreign headquarters still believe they will receive impartial tax treatment from our government? Will such companies send their best talent to help run U.S. facilities if their executives and family members could get locked up for weeks on end, as has already happened to several individuals with valid work and travel visas?
If American exceptionalism meant one thing, it was not having to ask these questions. Restoring the nation’s economic brand will require congressional and business leaders, along with dedicated citizens, to demand that a national commitment to serious economic policy norms and the rule of law is not a thing of the past.