Since the very beginning of his second administration, President Trump implemented a flurry of policies aimed at reshaping US trade, fiscal, and foreign policy. These policies are also redefining the country’s economic and political relationships with its traditional allies like the European Union and Japan.
Together with Gary Gensler and Simon Johnson, we invited a group of leading experts to contribute concise essays analysing the main economic consequences of the President’s actions and proposals. The result is The Economic Consequences of the Second Trump Administration: A Preliminary Assessment, a volume that brings together diverse perspectives on how this policy agenda is reshaping the domestic and international economic landscape.
The volume highlights several themes that define the first 100 days of the administration. First, heightened uncertainty, with rapid policy reversals and mounting legal litigation. Second, risk-taking, as the President embraces confrontation with allies and rivals. Third, executive action on overdrive, with over 140 executive orders by mid-May 2025. Fourth, testing boundaries of power, reviving constitutional debates over the unitary executive and regulatory independence.
Domestically, consumer confidence has fallen and inflation expectations diverge. US fiscal policy was already unsustainable before the implementation of the “One Big Beautiful Bill Act”, and the act is likely to make the situation even worse. Cuts to science funding, immigration, and rural programmes will have lasting costs to innovation and productivity.
Internationally, the administration accelerates what might be called the “end of the End of History”. US retrenchment undermines the two global public goods it long supplied — security and financial stability — while tariffs and attacks on multilateralism challenge the WTO and the dollar’s reserve role. Withdrawal from climate action, pandemic preparedness, and aid weakens the world’s ability to manage collective risks.
Spillovers to advanced economies are profound. Europe’s model — cheap Russian energy, Chinese demand, US security — is shattered. This pushes the EU toward greater defence spending, technological upgrading, and completing its internal market, making strategic autonomy essential. Beyond Western Europe, we examine US frictions with Canada, Greenland, Japan, and Ukraine.
Emerging and developing economies face acute vulnerability but also opportunities to shift in the dollar’s role. China confronts tariffs atop structural fragilities. Mexico, deeply tied to US trade, is highly exposed, while India may seize opportunities to liberalise and deepen EU ties. Cuts to US aid could trigger devastating health consequences in poorer countries.
While financial markets have so far remained resilient, the volume warns of deeper risks: a US retreat from supplying global public goods, erosion of the rule of law, and a weakening of international institutions. Market indifference to longterm threats might thus be misinterpreted and lead to policies that undermine both US dynamism and global stability.
Yet disruption is also driving recalibration: Europe is rearming and integrating, other nations are adapting, and external pressure may catalyse overdue reforms. In this sense, US withdrawal could hasten a transition to a more multipolar global economic order.
This article was published in Globe #36, the Graduate Institute Review.
