Thought of the Week:
More than thirty years ago, my wife and I spent our honeymoon in Hawaii. Because Hurricane Iniki had struck the island of Kauai just a few months earlier, we visited Maui and the big island of Hawaii. On Maui we drove the Road to Hana’s entire 64.4 miles stopping at Pua’a Ka’a Falls and Paia Town, hit the pro shop at Kapalua, and went scuba diving for the first time. On the Big Island we witnessed the eruption of Kilauea, visited Punalu’u’s black sand beach, and completed our first ocean dive.
Just as a romantic honeymoon is a symbol of love and happiness at the beginning of a marriage, a political honeymoon is an initial period of popularity often enjoyed by an incoming president. While it’s not surprising that presidents enjoy a honeymoon period, after all, they were just elected into office by at least a plurality of Americans, political scientists have found that beyond approval ratings, the honeymoon often translates into a heightened measure of political power early in a president’s term. Consider that a month into his term President Biden held a 60% approval rating, nine points higher than his winning vote share; after 100 days, the difference between President Biden’s job approval and vote share was still +3. Similarly, the differences between job approval and vote share after 100 days were +8 and +9 for President Obama (2009) and President Bush (2001), respectively. This week, a SurveyUSA poll revealed that President Trump recorded at least a 50% approval rating for the third straight time; in fact, the latest poll showed that a 51% majority approved of Trump’s job as president while just 45% disapproved—a net approval score of +6. What’s more, polls conducted by groups as diverse as AARP, CBS News, Morning Consult, Napolitan News, RMG Research, and Rasmussen all landed in net positive territory, and 538’s average tracker showed Trump at +3.8 approval.* Because it’s inevitable that political gravity eventually takes hold, that disappointment sets in, and job approval ratings fall back, a favorite parlor game among political analysts and lobbyists alike is predicting when the president’s honeymoon might end (Gallup has shown that presidential honeymoons have gotten shorter—where they once averaged 26 months early in American history, they’re now under seven months). National Journal’s Charlie Cook says President Trump’s honeymoon could end as soon as March 14 when the current continuing resolution authorizing government spending is set to expire. And while K street lobbyists have not been so bold as to point to a date certain, they are already shifting their messaging and adjusting strategies to increasingly warn about the potential harm to red-state voters that President Trump’s push to downsize government could bring. To shield clients, lobbyists are taking a delicate approach, sharing jobs and economic data with members of Congress, noting that red states stand to lose jobs. What’s clear is that steel and aluminum tariffs will hit red states harder than Democratic districts; GOP-maligned tax credits for wind, solar, and other renewable sources will cost jobs and investment in rural Republican areas and red states such as Texas; cuts in funding and personnel at national parks will ripple into Republican areas; the plan to dismantle USAID could affect American farmers who sell food to its aid programs; rural districts in red states such as Kansas are worried about retaliatory measures; tariffs on metals will hit the defense sector, as they’re used in manufacturing aircraft and missiles, particularly in red states; and even in a state like West Virginia, which Trump won by 42 points, business leaders are expressing concerns about how federal cuts and policies will impact the state. While lobbyists are moving cautiously for now, we know that political and policy environments change and political honeymoons end. Me, I’m lucky, I can say my honeymoon has never ended (hey, give me a break, she reads the blog).
*In contrast to positive approval ratings, 538’s and RealClearPolitics’ average trackers both showed that Trump’s current net favorability rating stood in negative territory. According to pollsters, it is not uncommon for voters to hold different views of public officials as people (favorability) versus job performance (approval).
Thought Leadership from our Consultants, Think Tanks, and Trade Associations
Eurasia Group Believes SecDef Hegseth is No Match for the Military-Industrial Complex. Defense Secretary Hegseth has ordered Pentagon leadership to develop plans for cutting 8% from the defense budget in each of the next five years. The plans exclude 17 categories from budget reductions, including military operations at the southern border, nuclear weapons, and missile defense programs. An 8% annual cut across the entire department in each of the next five years would mean almost $300 billion less in military spending through FY 2030 relative to a stable nominal budget figure. Given the number of exclusions, including the US Indo-Pacific Command, the cut is likely come significantly under that number, but would still be a meaningful reduction in the defense budget. The proposal is almost certain to draw opposition from both Democratic and Republican members of Congress. Bipartisan consensus—especially within the GOP—for increasing defense spending to address global volatility will likely mitigate against significant cuts to the defense budget. As a result, analysts are maintaining their call that defense spending will increase on net under President Trump, driven by a perceived need to prepare for future conflicts in the Indo-Pacific region and the increasing inclusion of defense sales in foreign policy negotiations.
Observatory Group Wonders if Reciprocal Tariffs will be the Great Trade War Accelerator. After introducing 25% tariffs on steel and aluminum, President Trump announced that he would impose reciprocal tariffs on all countries that have large trade surpluses with the U.S. If carried out, this would be a major blow to Europe, especially because the U.S. seems intent on treating the Valued Added Tax (VAT) as a non-tariff barrier. This would be a major change that could pave the way to very substantial (20%+) tariffs on many EU exports to the U.S. Brussels has tried to hold off responding to the U.S. tit-for-tat and is seeking avenues for negotiation, but the mood in EU capitals has soured and the union has drawn up a retaliation list against U.S. steel and aluminum tariffs. The EU still wants to preserve the WTO system, and since reciprocal tariffs are a clear violation of WTO agreements, the EU will have little choice but to respond with higher tariffs on American goods. They will likely be calculated to have the same economic impact as the original U.S. tariffs. Importantly, reciprocal tariffs would also widen the trade war to countries such as South Korea and Vietnam, which have been spared from Trump’s ire so far.
Sorini Samet Says Reciprocal Tariffs are not Imminent. Last week, President Trump signed a presidential memorandum directing the USTR and Secretary of Commerce to develop country-by-country reciprocal tariffs to “rebalance” U.S. trade relationships. The memorandum is intended to add leverage to White House efforts to negotiate reductions to the U.S. trade deficit by reducing barriers and increasing purchase commitments from major trade partners (the fact sheet can be found here). The reciprocal tariffs will target countries with higher tariff rates on U.S. goods than what the U.S. charges on their goods, and would, in setting a reciprocal tariff rate, take into account non-tariff measures, including subsidies, regulatory barriers, value-added taxes (VAT), and currency exchange rates. Specific items cited by President Trump include VATs and regulations in the European Union, high Most Favored Nation tariffs in India, and digital service taxes imposed by Canada and France. Although the framework for the reciprocal tariffs is allocable to all countries, it is likely that the White House will target the countries with the largest bilateral trade surpluses with the U.S. The top 15 countries account for almost 90% of the U.S goods trade deficit, so they are likely to be the focus of the effort. These countries include China, Mexico, Canada, countries in the EU, countries in ASEAN, Japan, Korea, and Taiwan. Due to the complexity and scope of the directive, the process to consider and implement the tariffs could take weeks or, even, months. Incoming Commerce Secretary Lutnick has suggested that some increased duties could begin as soon as April 2, although this sounds ambitious. The signing makes clear that the President will rely upon existing legal authorities to impose the tariffs, including Section 301, Section 232, and IEEPA, which have already been invoked for trade actions against Canada, Mexico, China, Colombia, and steel and aluminum.
“Inside Baseball”
It’s Safe to Say that DOGE is Dominating the Discussion in Official Washington. The sheer scale of the effort, combined with the fact that neither the White House nor DOGE has signaled what its ultimate goals are, or its next targets will be, is keeping Democrats off balance and everyone else in D.C. on edge. For one, there’s DOGE’s harsh ideological component—ending DEI programs and employee civil rights initiatives while claiming big budget savings for having done so. Next, following legal challenges last week against DOGE efforts to gain access to Treasury Department payment systems, DOGE has sought access to personal taxpayer data at the IRS. Now, DOGE’s next target seems to be the Pentagon. To date, the full scale of DOGE-related layoffs and firings has been stunning, running into the tens of thousands; going forward there are more than 200,000 probationary workers across various federal agencies, many, if not all, of whom will be laid off, including 15,000 at the IRS, 1,000 at the VA, 3,400 at the Forest Service, and 5,000-plus at NIH and CDC. Hundreds of FAA employees have been terminated, despite recent airplane crashes, but the Trump administration did stop the firing of 350 employees at the National Nuclear Security Administration, which oversees the nation’s nuclear stockpile. The haphazard, sometimes chaotic, process has stunned lawmakers; several GOP senators have complained about the scale and depth of the DOGE-related cuts, including Sens. Collins (R-ME), Murkowski (R-AK), Curtis (R-UT), Britt (R-AL), and Cassidy (R-LA). These Republicans have been careful to make clear that they’re not defending wasteful government spending or criticizing President Trump, but are warning that some of this may have gone too far, too fast, possibly even hurting their home states in the process. The DOGE initiative is claiming huge cost savings. For instance, EPA Administrator Zeldin has vowed to claw back $20 billion in grants awarded to clean energy and environmental projects in the closing months of the Biden administration. DOGE also reported that $1.9 billion of HUD money was recovered after being misplaced by the Biden administration. And HUD Secretary Turner has set up a DOGE task force that has identified more than $260 million in cost savings. Still, there’s widespread confusion on Capitol Hill and among government contractors over DOGE’s ultimate goals or how reshaped agencies or departments will function after downsizing. These changes have left many lawmakers baffled about how to oversee and fund the newly revamped departments, as well as who or what programs will be left.
In Other Words
“We’re going to go to Fort Knox, the fabled Fort Knox, to make sure the gold is there. If their gold isn’t there, we’re going to be very upset,” President Trump.
“It’s not real until we vote on it,” Senator Paul (R-KY) urging the Trump administration to have Congress institute DOGE’s cuts into legislation; this is likely to become a focus for Republicans, as they seek to turn spending cuts enacted by DOGE into scoreable offsets for a tax-cut extension.
Did You Know
U.S foreign aid spending in 2023 amounted to just 0.15% of GDP and 0.7% of the federal budget. The raw numbers: U.S. GDP $27,721 billion; U.S. federal spending $6,135 billion; and USAID budget $43 billion. At the same time, a recent survey showed that 89% of Americans say the U.S. should invest at least 1% of its federal budget in foreign assistance.
Graphs of the Week
President Trump’s promise of “reciprocal” tariffs could be his most disruptive action yet for the global economy—and that’s because tariffs aren’t the only targets. Economic officials were instructed to calculate—country by country—new tariffs based on the total barriers U.S. exports face, not just from tariffs, but also from taxes, regulation, exchange rates, and other non-tariff barriers.
