On Politics: Is Trump making America less competitive?
Experts fear his policies could raise costs and stifle innovation.
On Politics
July 9, 2025

Trump’s Washington

How President Trump is changing government, the country and its politics.

Good evening. Tonight, I speak with experts who worry that President Trump’s industrial policy could make the country less — not more — competitive. We’re also covering polling on Trump’s handling of the economy, and we look at an early answer to a question we posed on Monday. The news is first.

Shipping terminals in Miami last month. Scott McIntyre for The New York Times

Trump says he’s making America more competitive. Is he?

President Trump won his office twice by promising to turbocharge the American economy and restore its global dominance over international competitors. This week, he turned back to his favorite tool, dealing out threats of tariffs like a blackjack dealer confident that the house always wins.

“Tariffs are making our country ‘BOOM,’” Trump wrote on his social media site yesterday, where he also pronounced the country the “hottest” in the world.

Economists and industry experts, though, warn that Trump’s sweeping changes to the economy and the country may have the opposite effect, potentially positioning the United States to be less competitive on the global stage.

The tariffs are just one pillar of Trump’s industrial policy. Tonight, I’m taking a look at that aspect, as well as two others, and I’ll explain why some experts fear that six months of Trumponomics could stifle a key driver of American competitiveness: innovation.

Tariffs

Trade restrictions like tariffs are a longstanding strategy for presidents who want to strengthen or bring back domestic industries, a goal that can bolster national security objectives as well as economic ones. Robert Atkinson, the president of the Information Technology and Innovation Foundation, told me that tariffs could increase national competitiveness — but they come with risks, too.

Tariffs can wall off the American market while other countries trade freely with one another. And they can raise the prices of the goods American companies need to import in order to make their products, forcing them to reckon with higher costs, which their foreign competitors might not face.

That could harm core industries, like automobiles, aerospace and scientific instruments, he said.

“The tariffs will hurt those kinds of companies while helping this kind of Midwestern manufacturer that only sells in the U.S.,” Atkinson said, adding, “Good for them, but it’s not going to make America great again.”

Subsidies and tax incentives

Former President Joe Biden sought to revive industrial policy by passing legislation like the CHIPS act, which gave billions in government support to the semiconductor industry, and the Inflation Reduction Act, which offered subsidies and tax incentives to promote clean energy. Trump’s domestic policy bill slashed many of those energy tax breaks. Makers of solar panels and electric vehicles have warned that the measure will devastate their industries and make China’s advantage in both industries all but insurmountable.

Michael Lenox, a professor at the Darden School of Business at the University of Virginia, said that could leave American companies behind amid a global transition.

“If we’re not careful, we could be investing in yesterday’s technology when these new technologies come about,” said Lenox, who studies innovation and technology transitions. He added, “Are we doubling down on Blockbuster in the age of Netflix?”

The United States is not competitive when it comes to factors like labor costs, Lenox said. The key, he said, has always been the country’s knack for promoting experimentation and innovation.

Under Trump, that’s changing, too.

Innovation policy

Sabrina Howell, a finance professor at New York University who studies the role of the federal government in supporting innovation, says three intertwined factors have driven economic growth in the past half-century: publicly funded research, the immigration of highly skilled individuals and the country’s robust venture capital system.

“He is currently kneecapping the system in many ways,” Howell said of Trump.

The Trump administration has cut scientific research to its lowest level in decades, my colleagues reported in late May, and studies show those cuts could cause long-term economic damage. The cuts — as well as the administration’s crackdown on immigration and international students at schools like Harvard — could make the country less attractive to the world’s top talent.

“If we fail to invest in our basic R&D, if we fail to invest in attracting the world’s best talent, I don’t know if the effects are going to be seen immediately, but down the road, this could be disastrous for the U.S.,” Lenox said.

Experts believe the American system of private capital investment remains an advantage over a managed economy like China’s. But Atkinson said federal funding created the “seed corn” for private investment, and that cuts to public funding hobbled the whole system.

Jerome Powell, the chairman of the Federal Reserve, speaking before the House Committee on Financial Services in June. Eric Lee for The New York Times

IN HIS WORDS

A message for the Fed chairman

President Trump is unhappy with the Federal Reserve chair, Jerome Powell. Again. My colleague Minho Kim, a reporter in the Washington bureau, explains.

On social media, Trump lashed out at Powell, complaining that the federal funds interest rate was “AT LEAST 3 Points too high,” and demanding that Powell lower it. (The current rate is between 4.25 and 4.5 percent. The last time it was three points lower was June 2022.)

Trump also hit Powell with a favorite nickname, “Too Late,” a reference to what he sees as the Fed’s continued postponement of rate cuts. The president has demanded lower borrowing costs in order to ease the federal government’s interest burden.

“‘Too Late’ is costing the U.S. 360 Billion Dollars a Point, PER YEAR,” Trump wrote on Wednesday morning.

The jab at Powell comes as Trump’s aides and allies vie to become the next Fed chair. Two fierce Trump defenders in the administration, Treasury Secretary Scott Bessent and Kevin Hassett, the president’s chief economic adviser, are both seen as key contenders for the job, which will open up when Powell’s term ends next May.

Many economists are concerned about having a Trump ally as the head of the Federal Reserve — and letting the whims of the president and politics interfere with long-term economic policy. They warn that lowering interest rates when inflation is still at risk of flaring up because of tariffs, and the economy is still relatively solid, could prevent price pressures from easing.

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ONE NUMBER

A chart shows the uptick in disapproval in Trump’s handling of the economy, based on a weekly average of available public polling. On the week of Jan. 20, the share of those who disapproved of Trump’s handling of the economy was 36 percent, compared with 50 percent the week of July 6.
Data is from the weeks of Jan. 20 to July 6. | By The New York Times

President Trump’s handling of the economy has been a key source of his strength in public opinion polls. But since the start of his second term, disapproval of his economic stewardship has steadily crept up, my colleague Ruth Igielnik writes.

In January, more Americans approved than disapproved of Trump’s handling of the economy. Those numbers are now flipped. Around 50 percent of Americans disapprove, while 43 percent approve, according to a New York Times average of public polling.

Economic disapproval reached a peak in mid-June, when Trump attacked Iranian nuclear sites and expanded steel tariffs. At the time, around 60 percent of Americans said they disapproved of his economic decision-making.

After his threats on Monday to impose new tariffs, Americans’ economic outlook could again be in flux as they try to understand how sweeping new tariffs might affect their wallets.

Much of the new disapproval of Trump’s handling of the economy has come from Republicans and younger voters. While a vast majority of Republicans still approve, the share who disapprove rose to 22 percent in mid-June, up from 14 percent in March, according to Fox News. Some polling suggests independents have also begun to sour on the president’s economic policies.

Among voters under 30, disapproval grew to 60 percent, from 45 percent, over the course of six months, according to polling from YouGov and the Economist.

Disapproval of Trump’s handling of inflation also grew in the Fox News poll. Nearly two-thirds of voters now disapprove, up from 58 percent in March.

Concerns about the economy and concerns about tariffs are often intertwined. Voters are twice as likely to say they expect that imposing tariffs on imported products will hurt, rather than help, the economy, according to the Fox News poll. Fully 30 percent of Republicans are concerned about harm to the economy, up from 21 percent in March.

Still, it is far too early for Trump’s opponents to find solace in the economic numbers. Large shares of Americans still approve of how the president is handling the economy. And the growth in disapproval has been small. Economists expect it to take a while before Americans feel the impact of increased inflation as a result of the tariffs.

A FEMA staging area in Kerrville, Texas, on Tuesday. Loren Elliott for The New York Times

CIRCLING BACK

A look at FEMA’s role in Texas

On Monday, my colleague Christopher Flavelle outlined three big questions for the federal government after the devastating flooding in Central Texas. One was simple: What’s the role of FEMA, the disaster relief agency Trump has proposed dismantling, on the ground?

Our colleague Maxine Joselow, who covers climate policy, has spoken to half a dozen current and former FEMA officials, who told her that the agency has been slow to activate certain teams that coordinate response and search-and-rescue efforts.

In an internal update, the agency said about 70 search-and-rescue workers were sent to Kerr County, Texas, which sustained the worst damage, and a dozen others to Austin to help manage responses. While every disaster presents unique challenges and FEMA is intended to play only a supporting role in any response, the experts told Maxine that a disaster like this would normally prompt a bigger and faster deployment.

Read more here.

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