The Economic Fallout of Trump’s Policy U-Turns: A Lesson in Shooting Ourselves in the Foot

On January 20, 2025, President Donald Trump returned to the White House with sweeping policy changes aimed at reshaping federal programs, trade agreements, and immigration policies. While his actions resonate with promises to cut costs and prioritize national interests, they risk triggering significant economic consequences—both immediate and long-term. By drawing parallels to the Great Depression, Greece’s austerity crisis, and other historical events, we can better understand the potential fallout of these abrupt shifts and their disproportionate impact on women, marginalized communities, and lower-income groups.

As a humble student of history, I offer these observations and lessons learned from the past.

1. Job Losses and Economic Contraction

One of the administration’s first moves was to eliminate federal Diversity, Equity, and Inclusion (DEI) programs, putting thousands of federal employees on administrative leave and planning for layoffs. Similar downsizing is being proposed in other federal departments, including environmental and justice initiatives. These job cuts could ripple across the economy, particularly impacting workers in urban areas and regions heavily reliant on federal employment.

Historical Parallel: The Great Depression

During the Great Depression, unemployment reached 25% in 1933, displacing 12.8 million workers out of a civilian labor force of over 51 million. This catastrophic unemployment was driven by multiple factors, some of which echo challenges we face today:

• Technological Advancements: The assembly line and mechanization replaced skilled workers with semi-skilled labor, benefiting younger workers but displacing older ones. Similarly, today’s advancements in automation and AI are reducing demand for traditional jobs, particularly among workers without access to retraining.

• Shift in Demand: During the Depression, demand for unskilled jobs fell, while World War II increased demand for commodities and war materials. Today, global shifts toward green energy and high-tech industries are reshaping labor markets, often leaving traditional sectors behind.

• Falling Crop Prices: The 1930s saw a 60% decline in crop prices, devastating rural economies. Although the dynamics differ today, trade wars and climate-related challenges threaten agricultural livelihoods.

Impact on the Economy

• Real GDP fell by 29% from 1929 to 1933.

• Consumer prices fell 25%, while wholesale prices dropped by 32%.

• Nearly one-third of the banking system failed between 1930 and 1933.

Relevance Today: Federal job cuts, declining support for agriculture, and the rapid pace of technological change could replicate the dynamics that drove economic contraction during the Great Depression, though modern safety nets may mitigate the worst outcomes.

Groups Most Affected:

• Women and Single-Parent Households: Federal jobs often provide stable employment for women, particularly in urban areas. Layoffs could disproportionately harm women, increasing financial insecurity for single-parent families.

• Lower-Income Workers: Those in clerical or support roles within the federal government, often from lower-income backgrounds, are more likely to lose jobs, compounding existing inequalities.

Relevance Today: Federal DEI workers and contractors are often concentrated in urban areas, where public sector salaries sustain local businesses. Mass layoffs could create ripple effects in retail, hospitality, and other sectors reliant on consumer spending.

2. Decline in International Trade

Trump’s decision to withdraw from trade agreements and impose tariffs on foreign goods mirrors past protectionist policies that led to global trade disruptions. Workers in manufacturing and export-dependent industries, such as agriculture, may bear the brunt of these changes.

Historical Parallel: The Smoot-Hawley Tariff Act (1930)

This infamous tariff law raised import duties, prompting retaliatory measures from other countries. The result was a trade war that caused international trade volumes to plummet by over 60% between 1929 and 1934. Export-dependent industries in the U.S., such as agriculture, were devastated, worsening the economic downturn.

Global Context: Post-Brexit UK

The UK’s withdrawal from the EU created significant trade barriers, reducing export opportunities and foreign investment. Small and medium-sized businesses bore the brunt of higher costs and disrupted supply chains.

Groups Most Affected:

• Rural Farmers: Reduced access to international markets could lead to falling crop prices, replicating the struggles faced by farmers during the Great Depression.

• Factory Workers: Manufacturing jobs tied to exports could see layoffs as retaliatory tariffs reduce demand for U.S.-made goods.

• Marginalized Communities: Workers in low-wage factory and agricultural jobs, many of whom are from minority backgrounds, could face heightened vulnerability.

Relevance Today: U.S. industries like agriculture, manufacturing, and technology rely heavily on global markets. Retaliatory tariffs and reduced market access could shrink exports, raise costs for businesses, and ultimately harm consumers.

3. Reduced Government Spending

Cuts to federal spending are being framed as a way to reduce waste, but history shows that reducing public expenditures during economic uncertainty often backfires. Communities reliant on federal funding for social services, education, or environmental programs are likely to face the most significant consequences.

Historical Parallel: Great Depression Spending Cuts (1930–1932)

In the early years of the Depression, many state and local governments slashed spending to balance budgets. These cuts exacerbated unemployment and deepened the crisis until federal intervention through the New Deal injected spending back into the economy.

Global Context: Argentina’s Austerity (2001)

Argentina’s austerity measures, implemented to address a debt crisis, led to economic collapse. Severe spending cuts reduced public services, increased poverty, and sparked widespread protests.

Groups Most Affected:

• Women in Social Services: Women disproportionately work in healthcare, education, and social programs, sectors that may face significant budget cuts.

• Lower-Income Families: Cuts to programs like housing assistance, healthcare subsidies, and food security initiatives could exacerbate economic hardship.

• Environmental Workers: Employees in federally funded environmental initiatives face job uncertainty, particularly in regions impacted by pollution or climate-related challenges.

Relevance Today: Reducing federal funding for social programs, environmental initiatives, and equity-focused policies risks shrinking economic activity in sectors dependent on government contracts and services. These cuts disproportionately harm vulnerable communities, further widening inequality.

4. Housing, Mortgage, and Banking

Abrupt policy changes, combined with reduced federal spending and market uncertainty, are likely to impact the housing and financial sectors. Rising interest rates, reduced consumer confidence, and banking instability could create ripple effects in housing markets.

Historical Parallel: The Great Depression Housing Crisis

During the Great Depression, widespread unemployment and financial instability caused massive foreclosures and plummeting property values. Banks, struggling with liquidity, reduced mortgage lending, worsening the housing crisis.

Global Context: 2008 Financial Crisis

The deregulation of financial markets and risky lending practices led to a collapse in the housing market. Foreclosures surged, property values fell, and families faced eviction, triggering a global recession.

Groups Most Affected:

• First-Time Homebuyers: Rising interest rates and reduced mortgage availability could make homeownership increasingly inaccessible.

• Renters in Low-Income Housing: Cuts to housing assistance programs may lead to evictions and homelessness for vulnerable families.

• Bank-Dependent Small Businesses: Reduced liquidity and higher borrowing costs may limit business expansion and survival.

Relevance Today: Policy uncertainty and reduced federal support for housing programs could increase foreclosures and destabilize real estate markets. Lower-income families and renters may bear the brunt, facing displacement and reduced access to affordable housing.

5. Financial Sector Instability

Sudden policy changes often lead to uncertainty in financial markets, which can exacerbate economic instability. Families and small businesses with limited financial resilience may struggle most in such volatile environments.

Historical Parallel: Bank Failures During the Great Depression

A lack of confidence in the financial system led to widespread bank closures, wiping out savings and further reducing consumer spending. The Federal Reserve’s delayed response deepened the crisis.

Global Context: 2008 Financial Crisis

The deregulation of financial markets contributed to risky lending practices, which triggered a global recession when the housing bubble burst. The resulting instability highlighted the importance of regulatory safeguards.

Groups Most Affected:

• Small Business Owners: Increased market volatility could make it harder to secure loans or attract investment.

• Middle-Class Families: Financial uncertainty and rising costs could squeeze household budgets, leading to reduced spending.

• Marginalized Workers: Those in precarious employment or reliant on gig work may face greater financial vulnerability during periods of instability.

Relevance Today: Policy uncertainty—such as shifts in trade agreements or financial regulations—could increase market volatility. Businesses may delay investments, and consumer confidence could decline, further slowing economic growth.

6. Workforce Readiness and Immigration Constraints

While tech moguls often envision innovation-driven economic growth, the U.S. education system and restrictive immigration policies may hinder such ambitions. Immigration laws that limit the flow of skilled workers compound existing workforce gaps, particularly in STEM fields, while rapid technological advancements threaten to displace traditional jobs faster than the workforce can adapt.

Challenges:

• Educational Gaps: Only 20% of U.S. high school graduates are prepared for college-level STEM courses, leaving a significant talent shortfall. Without comprehensive federal education initiatives, these gaps could grow, limiting access to high-tech, high-paying jobs for large portions of the population.

• Tech Industry Reliance on Immigrants: Over 50% of billion-dollar U.S. tech startups were founded by immigrants or their children. Restricting immigration limits access to global talent and hampers competitiveness in AI, biotech, and clean energy.

• Automation and Job Displacement: Just as the assembly line displaced skilled labor during the Great Depression, advancements in artificial intelligence and robotics are automating tasks across industries. While these technologies can drive productivity, they also risk creating structural unemployment for workers lacking access to retraining programs.

• Contradictions with Innovation Goals: Restrictive policies could force U.S. companies to outsource operations or lose ground to global competitors, directly undermining economic promises. Nations like China and India are investing heavily in STEM education and workforce development, positioning themselves as global leaders in emerging industries.

Historical Parallel: The Great Depression and Technology

During the Great Depression, the rise of mechanization, such as assembly lines, displaced skilled workers and created structural unemployment. Younger and less-skilled workers benefited from the shift, but older, skilled workers often struggled to adapt. Today, automation and AI are creating similar dynamics, with workers in manufacturing, logistics, and even white-collar jobs facing the threat of replacement by machines and algorithms.

Relevance Today:

Without robust investment in education and more balanced immigration reforms, the U.S. risks slowing its innovation pipeline and ceding leadership to nations like China and India. Moreover, failing to address technological displacement through reskilling programs could exacerbate inequality and unemployment, creating social and economic instability.

Groups Most Affected:

• Low-Income Workers: Jobs in retail, manufacturing, and transportation are among the most vulnerable to automation, disproportionately affecting workers without access to higher education.

• Immigrant Communities: Immigrants have historically filled key gaps in STEM fields and high-demand industries. Restrictive immigration policies could prevent these communities from contributing fully to the economy.

• Women and Underrepresented Minorities: These groups are often underrepresented in STEM fields and may face additional barriers to accessing the education and training needed to transition into high-tech industries.

7. The Irony of Gutting the Education Department

Trump’s proposal to eliminate the Department of Education and transfer control entirely to states might sound like a win for local governance, but it risks exacerbating educational inequality and undermining workforce readiness.

Historical Parallel: Unequal Educational Access

Before federal oversight, states varied widely in their investment in public education, with wealthier areas offering better resources while poorer regions fell behind. Federal interventions like Title I funding helped level the playing field by providing targeted support to low-income schools.

Additional Example: Post-Reconstruction Southern Education

After the Reconstruction Era, Southern states severely underfunded public education for African Americans, perpetuating cycles of poverty and limiting social mobility. Without federal intervention, disparities in resources, teacher quality, and infrastructure widened, creating long-term economic and social inequities.

Global Context: Decentralized Education in Developing Nations

In countries where education is primarily managed by local governments, disparities in funding often lead to stark regional inequities. Rural and economically disadvantaged areas typically receive fewer resources, creating cycles of poverty and limited social mobility.

Example: India’s Unequal Educational Access

In India, state-managed education systems often fail to provide consistent quality, with wealthier regions significantly outperforming poorer ones. Federal initiatives, such as the Right to Education Act, aim to address these disparities, but without strong central oversight, gaps persist.

Groups Most Affected:

• Students in Low-Income Areas: Without federal funding and oversight, schools in disadvantaged areas may lack basic resources, from qualified teachers to modern technology.

• Rural Communities: States with large rural populations may struggle to fund schools adequately, limiting opportunities for students.

• Future Workforce: Gaps in STEM and technical education could widen, leaving the U.S. workforce ill-prepared for high-tech industries.

Relevance Today:

Eliminating the Education Department could deepen educational inequalities, making it harder for underprivileged students to access quality education. This, in turn, hinders economic mobility and weakens the talent pipeline needed for national innovation. It risks creating a generation unprepared for the challenges of a technology-driven global economy.

Conclusion

The U.S. economy today may seem to have significant strengths compared to the era of the Great Depression, including:

• Modern Monetary Tools: The Federal Reserve has advanced mechanisms to stabilize markets and manage liquidity, preventing catastrophic bank runs or credit crises.

• Safety Nets: Programs like unemployment insurance, Social Security, and Medicaid, which were absent in the 1930s, provide a baseline of economic security and prevent extreme poverty.

• Global Economic Integration: The interconnectedness of global markets creates opportunities for diversification, trade, and collaboration that did not exist during the Great Depression.

However, these strengths could be undermined by shortsighted policies:

• Overreliance on Market Forces: Policies that cut federal spending and eliminate oversight, such as gutting the Department of Education, risk creating disparities that ripple across the workforce and economy.

• Restrictive Immigration Laws: Innovation and growth rely on access to skilled talent, which is stifled by limiting immigration pathways.

• Protectionism: Tariffs and trade barriers could trigger retaliatory actions, shrinking export markets and increasing costs for domestic industries.

The lessons of history are clear: abrupt and poorly planned policy shifts often lead to unintended economic consequences. While the U.S. economy is more resilient today, the risks of prolonged stagnation, growing inequality, and weakened global competitiveness are real. To avoid these pitfalls, transitional policies, investments in education and innovation, and balanced governance are essential. History teaches us that even the strongest economies can falter without foresight—lessons we cannot afford to ignore.