Congress Must Act to Protect Americans from the Coming Trump Recession
Our view on how Congress should protect small businesses and workers.
By Kainoa Lowman and Helaine Olen
The Trump administration’s chaotic, erratic and unsteady policymaking is increasing the risk of a recession or, in a worst case scenario, an economic crisis.
Trump announced a 90-day pause on the bulk of his Liberation Day “reciprocal” tariffs on Tuesday afternoon. The surprise decision resulted in a wave of relief across Wall Street, sending the stock market surging—and inviting accusations that Trump manipulated the market to enrich insiders and the capital class broadly. Call option purchases spiked suspiciously just minutes before Trump made his announcement; when the dust settled, billionaires added $304 billion to their collective net worth on Wednesday, the largest one-day increase in the history of the Bloomberg Billionaires index.
But financial relief and possible corruption aside, the reckless tariff back and forth has already done substantial damage to America’s real economic outlook. Business investment and hiring came to a standstill; companies have revised down their earnings guidance, consumer and business sentiment is plunging. Moreover, a 10% across-the-board tariff remains in place, and Trump raised the tariff rate on China to 125%. It’s a short-term reprieve for financial markets, but it will not resolve the underlying policy uncertainty that threatens to drag America into recession. “If anything, uncertainty arguably has increased,” Gregory Daco, chief economist at EY Parthenon, told Politico, adding that he expected the situation to act as a damper on hiring and investment “until we get a firm announcement of: ‘This is going to be the trade policy that we’re going to be adopting, and it’s going to be in place for the forseeable future.’”
This is not a sustainable path to replace our current broken trade regime. Instead, we need a strategic and certain tariff regime, one aimed at protecting key sectors. It would impose broad-based tariffs on large export-driven countries that employ unfair practices such as China, Taiwan, and Germany, with the goal of restoring America’s ability to produce critical products necessary for the health, safety, and security of American families.
However, the Trump tariffs have offered the opposite of a steady and predictable business climate. Main Street is particularly harmed by the current haphazard approach. Already, we’re seeing large corporations with market power wield their heft over suppliers to protect their margins from tariff-related price increases, leaving smaller competitors and business partners with the short end of the stick. As Senator Warren put it on CNBC Wednesday morning: "Small businesses are worried they're gonna get capsized in the turmoil.”
On top of all this, DOGE’s decimation of regulators has hollowed out government capacity to respond to this brewing economic crisis — a crisis that Trump both created and is perpetuating.
Our view at Economic Liberties is that this moment demands a strong response from Congress that meets the challenge and scale of the chaos that Trump has unleashed. Specifically, Congress should take immediate steps to restore government oversight of financial markets and protect small businesses and workers from the impacts of the downturn Trump himself instigated.
Immediately dissolve DOGE so it cannot break any more parts of the government, and bar firings for 60 days at government agencies, especially in the financial regulatory agencies tasked with managing bank stability and consumer protection, Small Business Administration, and the Commerce Department.
Set up a small business protection fund to help small and medium size businesses hit by the Trump crash to stay solvent, and restore capacity at the Small Business Administration — potentially moving employees from the Fed over — to manage incoming demand due to cash flow and business disruptions.
Protect small retailers and vendors by ordering rigorous enforcement of the Robinson-Patman Act (RPA) to prohibit price discrimination against smaller stores and vendors in allocations of supply. Wholesalers often favor larger retailers—which can weaponize their market power to demand discounted supply deals—in times of crisis, raising costs on and restricting the inventory of smaller players that are forced compensate for that offset.
Pair any use of emergency lending authority to large financial institutions with a broad-based prohibition on mergers, stock buybacks, dividend increases and other forms of financial engineering by any firm with more than $20 billion in revenue. Simply put, the government should not underwrite consolidation and shareholder payouts with taxpayer money, especially at a time where working families and small businesses are suffering. While past legislation such as the CHIPS Act prohibited government funds from being spent directly on stock buybacks, money is fungible and this does not go far enough.
In addition, Americans need transparency with respect to bilateral trade “deals” that emerge from Trump’s tariff back and forth policies. As Rethink Trade expert Lori Wallach has stated:
“The Trump administration could be striking deals with dozens of countries, but absent transparency, the public will not know whether their interests or Trump’s billionaire cabinet and friends on Wall Street or his family are being served. Deals must focus on addressing the mercantilist practices that some countries employ, which fuel the extreme global trade imbalances that have deindustrialized the United States and today deny the benefits of trade to numerous countries worldwide. The Trump administration must not use these talks to bully countries into gutting their online privacy and Big Tech anti-monopoly policies or undermining their food safety, health or environmental laws.”
All of these steps will help protect Americans from the consequences of Trump’s erratic — and possibly self-serving — trade negotiation strategies.