With the Republican budget and Trump's tariff games, there's no relief in sight

We’d like to think that as traders seek to bring markets back to where President Joe Biden left them, the worst is behind us. It's not.

By Heather Boushey

For more than a month, headlines have been fraught with the latest developments surrounding President Donald Trump’s on-again, off-again tariffs. The world has waited to learn whether the president would back down or make deals and, if so, whether a decisive course of action would come in time to avert a full-blown recession. Meanwhile, Elon Musk’s DOGE chainsaw and planned cutbacks from the president’s budget and the Republican tax plan emerging from House Committees this week have received far less attention. Yet, the economic damages from the latter look to be deep and long lasting, and, once put in place, they could take decades to reverse—if ever.

The warnings about economic chaos from Trump’s tariff policy have been loud and voluminous. In the days after Trump’s “Liberation Day,” the stock market crashed (there’s already a Wikipedia entry on those eight dramatic days in April), and consumer confidence fell sharply. The hard data, however, has yet to show the real effects as neither April’s job market nor inflation data provides indications of being in an economic crisis.

Now, the stock market has returned to “normal,” as the announced deal with China and promises of an agreement with the United Kingdom put the economy on a new course with higher but seemingly stable tariffs. But what will this mean for U.S. manufacturing? Even as Trump has promoted tariffs, his administration and congressional Republicans have moved to gut America’s industrial policies that support domestic manufacturing.

Case in point: The just-released House Republicans plans for Trump’s “Big, Beautiful Bill” will endanger billions from manufacturing by cutting clean energy investment and production, which are critical sectors for future economic competitiveness.

Already, we’re seeing signs of slowing investment in clean energy, which fell in the first quarter of 2025 by 3.8% from the prior quarter. Most of these investments—77%—are in Republican congressional districts, threatening economic development. What’s worse is that because much of this investment is relatively new and has grown quickly, communities might get stuck with factories that aren’t able to grow at the scale promised—or be competitive at all.

The manufacturing ecosystem situation also looks bleak upstream. To be a leader in cutting-edge technologies, we need to invest in innovation. That means investing in people and places that foster cutting-edge research. This is exactly the opposite of what Trump, DOGE, and the Republican tax proposal aim to do. The president has limited research funds to America’s universities, starving research laboratories of the resources they need to discover cures for diseases and advance science.

This disinvestment in science isn’t just about the big, well-endowed universities. Schools around the country, many of which are the economic anchor for their local economies, are also seeing cutbacks. And more could be on the horizon: If the Republicans in Congress succeed in cutting nutrition and health care services for those in need, states will be left picking up the tab, and that will mean cutbacks in other areas that states fund, the bulk of which is education. Congress cannot make “the largest cuts to both Medicaid and the Supplemental Nutrition Assistance Program (SNAP) in history” without it affecting local economies—and not in a good way.

For many communities, relying on so-called “eds and meds,” that is, education and health care, as their local economic engine, has been a good bet. These industries have been more resilient to economic shocks, and the jobs have historically been less likely to be offshored or outsourced. But DOGE and the congressional tax plan could upend all that so billionaires can get yet another massive tax cut.

Now, we’d all like to see the nascent trade “deals” as permission to breathe a sigh of relief. We’d like to think that as traders seek to bring markets back to where President Joe Biden left them, the worst is behind us. But nothing could be further from the truth. The cuts Trump and Musk made without congressional approval could be compounded by congressionally approved cuts that will take food from the poor and reduce access to health care. These won’t have the on or off switch of Trump’s chaotic tariffs, and they will have deeper and more lasting negative economic repercussions.

Heather Boushey served on President Joe Biden's Council of Economic Advisers and was chief economist for the Invest in America Cabinet at the White House.

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