This week has been perhaps the most challenging week for the Trump administration since entering office. Investors watched the stock and bond markets closely as new tariffs against Mexico, Canada, and China went into effect and forecasted economic growth shrank and even turned negative.

Wall Street was not happy with the uncertainty of this week, particularly as it relates to tariff policy.

“The political volatility is now definitely translating into economic volatility,” veteran Republican consultant Jason Roe told the Washington Examiner on Friday.

To begin the week, the stock market tanked as investors began worrying more about tariffs, huge cuts to government, and projections that gross domestic product growth was slowing.

The Dow Jones Industrial Average dropped some 1,300 points on Monday and Tuesday alone. Despite rising some on other days, the index still posted its worst week since September 2024.

During Trump’s address to a joint session of Congress, he addressed the economic elephant in the room but downplayed its scale and staying power.

“There will be a little disturbance, but we’re OK with that,” Trump told lawmakers. “It won’t be much.”

Generalized anxiety on Wall Street is captured by the Chicago Board Options Exchange Volatility Index, better known as VIX but also as the “fear index.” Notably, the VIX was up about 20% over the past five days and has risen more than 41% in the past month.

Although Trump campaigned on ramping up tariffs, the scale of his enacted and planned tariffs has surprised markets. Some investors thought Trump was using the theat of tariffs as a bluff and negotiating ploy, and to some degree he might be, but this week showed that Trump is willing to wield them against allies and adversaries alike.

After a monthlong delay, 25% tariffs went into effect against Mexico and Canada. China was also slapped with more tariffs. Notably, Trump later delayed tariffs for products under the U.S.-Mexico-Canada Agreement on trade.

Most economists argue that tariffs are a drag on growth, as the increased costs are passed through to the consumer in a way akin to a tax.

Bessent, who has been very supportive of the Trump tariff agenda, acknowledged in an interview Friday that there will be some economic upheaval.

“Could we be seeing that this economy that we inherited starting to roll a bit? Sure,” Bessent said on CNBC.

Bessent said that some of the economic disarray is fallout from the administration of former President Joe Biden, but he also pointed out that the cuts to the federal government are contributing to some pain in the financial markets.

“There’s going to be a natural adjustment as we move away from public spending to private spending,” he said. “The market and the economy have just become hooked. We’ve become addicted to this government spending. And there’s going to be a detox period.”

Sean Snaith, an economics professor at the University of Central Florida and the director of UCF’s Institute for Economic Forecasting, told the Washington Examiner that the cuts being undertaken by the Department of Government Efficiency are sure to have an effect on the broader economy. While it is still unclear how much DOGE will cut, he said there will be ripple effects.

“There is no magic wand to kind of fix our debt and deficit problem,” Snaith said. “So yeah, when you reduce funding significantly, you’re going to slow the economy.”

Snaith said there might be some stabilization once “the policy dust settles a bit” and it becomes clearer what the Trump administration’s longer-term stance on tariffs is and there is more certainty surrounding how much DOGE will end up cutting.

“The good news is the economy is in a pretty good position, the labor market strong,” he added. “So I think we’re in as good a position as we could be to weather the kind of changes that we’re going to have to make to get our fiscal ship righted again.”

It is also worth noting that consumers, driven by economic uncertainty, are also wary about the economy and about long-term inflation prospects.

“It seems unlikely that, for the foreseeable future, a high degree of uncertainty is going to go away,” Mark Hamrick, senior economic analyst at Bankrate, told the Washington Examiner. “Uncertainty undermines confidence on the part of consumers and businesses.”

Consumer sentiment has soured as well. Consumers increasingly think that inflation will continue to persist, despite the Federal Reserve’s efforts to drive it down.

The University of Michigan Consumer Sentiment Index for February indicated that consumers think inflation will climb at an annual rate of 3.5% over the next five to 10 years. That is well above the Fed’s preferred 2% level.

TRUMP’S ‘LITTLE DISTURBANCE’ COULD TURN INTO A RECESSION, ECONOMISTS WARN

Roe pointed out that Democrats have been attacking Trump and Republicans hard on the economy but that those attacks are “all they have right now,” calling the party “rudderless.”

Looking ahead, Roe said, what is going to matter politically is how long the turbulence drags out for households and voters. Trump will probably be extended about a six-month runway, he said.