Billboard at Walthamstow motorway, north London
The S&P 500, which tracks the stock performance of 500 of the biggest companies that are listed on U.S. stock exchanges and is the world’s most widely followed stock market benchmark, dropped 77.78 points, or 1.39%, ending the day more than 10% off its record high of less than a month ago and entering into “correction” territory. A market correction is a period of rapid change that drops the value of stocks by at least 10%.
Other major indexes have also fallen into correction as President Donald Trump’s tariffs and tariff threats, along with dramatic cuts to federal funding and federal employment, are hobbling the national economy. The Dow Jones Industrial Average fell 537 points, or 1.3%, and the Nasdaq Composite fell 2%.
In the wake of the dropping markets, Trump announced on his social media platform today that if the European Union did not drop its 50% tariff on whiskey, imposed as retaliation for Trump’s tariffs on aluminum and steel, he would impose a 200% tariff on all “WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER E.U. REPRESENTED COUNTRIES.” He added: “This will be great for the Wine and Champagne businesses in the U.S.”
In fact, journalist Dave Infante, who covers drinking in America at Fingers, noted that while it seems counterintuitive, such a tariff would “crush the US wine industry. Booze gets to market on distributors' trucks,” he posted. “These fleets need volume to run efficiently. Subtract EU wine from the equation & it no longer pencils out. Any gains from less competition would likely be paid back out in margin loss.”
Kai Ryssdal of the radio show Marketplace posted: “I'm honestly running out of words I can use on the air to describe what's happening in and to this economy.”
There is a grim fascination in the 1929 stock market crash, when Americans watched with horror as the bottom fell out of the economy. In our memories, reinforced by jerky black-and-white newsreels, that crisis shows businessmen aghast as fortunes disappeared in heavy trading that left the ticker tape that recorded prices running hours behind only to toll men’s destruction when it finally reached the end of the day’s sales.
But the stock market crisis of 1929 came from structural imbalances in the nation that created a weak economy in which about 5% of the country received about one third of the nation’s income. What really jumps out today is that, in contrast to 1929, the national economy is strong—or was just a month ago. In fact, before Trump took office, it was the strongest of any economically developed country in the world.
The blame for the falling market in the United States today can be laid squarely at the feet of the new presidential administration, with the tariff war it has instigated and the sweeping cuts it has made to United States government employment. President Donald Trump and his staff insist that the pain he is inflicting on Americans will pay off in long-term economic development, but they have deliberately thrust a stick into the wheels of a strong economy.
It is an astonishing thing to watch a single man hamstring the United States economy. It is also astonishing to watch Republican senators try to convince the American people that a falling stock market and contracting economy is a good thing. “Our economy has been on a sugar high for a long time. It’s been distorted by excess government spending,” Montana Senator Tim Sheehy told Fox News Channel host Larry Kudlow today. “What we're seeing here from this administration and what you're gonna see from this Congress is re-disciplining to ensure that our economy is based on private investment and free-market growth, not public sector spending.”
In fact, until a brief spike in spending during the coronavirus crisis, government expenditure in the United States as a percentage of gross domestic product has held relatively steady around 20% since the 1950s.
Today, Trump met with Secretary-General Mark Rutte of the North Atlantic Treaty Organization (NATO) who was eager to get Trump to reiterate U.S. support for NATO. Trump told Rutte that the United States needs control of Denmark’s autonomous territory of Greenland “for international security, not just security—international—we have a lot of our favorite players cruising around the coast, and we have to be careful.” Asked about whether the U.S. would annex Greenland, he answered: “I think that will happen.”
At that same meeting, Trump talked about his order to release water from two California dams in January allegedly to deliver water to Los Angeles after the devastating wildfires in that region, although water managers in Los Angeles said they had plenty of water for firefighting. A February 3 memo from the Army Corps of Engineers, obtained by Scott Dance and Joshua Partlow of the Washington Post under the Freedom of Information Act, makes it clear that officials knew that the 2.5 billion gallons they released in response to Trump’s order “could not be delivered to Southern California.”
In fact, as Ian James explained in the Los Angeles Times, water releases are usually carefully considered, and local water managers and lawmakers thought the sudden plan was potentially “ruinous,” worrying that an abrupt surge of water could damage the lands and people downstream while wasting water that would be needed during the hot growing season.
That’s not how Trump portrayed the sudden release of water. After talking to reporters about the upcoming congressional budget fight, he suddenly pivoted to Los Angeles, and from there to water. "I broke into Los Angeles, can you believe it, I had to break in,” he said. “I invaded Los Angeles and we opened up the water, and the water is now flowing down. They have so much water they don't know what to do. They were sending it out to the Pacific for environmental reasons. Ok, can you believe it? And in the meantime they lost 25,000 houses. They lost, and nobody’s ever seen anything like it. But, uh, we have the water—uh, love to show you a picture, you’ve seen the picture—the water’s flowing through the half-pipes, you know, we have the big half-pipes that go down. Used to, twenty-five years ago they used to have plenty of water but they turned it off for, again, for environmental reasons. Well, I turned it on for environmental reasons and also fire reasons but, ah, and I’ve been asking them to do that during my first term, I said do it, I didn’t think anything like could happen like this, but they didn’t have enough water. Now the farmers are going to have water for their land and the water’s in there, but I actually had to break in. We broke in to do it because, ah, we had people who were afraid to give water. In particular they were trying to protect a certain little fish. And I said, how do you protect a fish if you don’t have water? They didn’t have any water so they’re protecting a fish. And that didn’t work out too well by the way….”
Today, U.S. District Judge William Alsup ruled that federal agencies must immediately offer thousands of probationary workers purged from the government in the early weeks of Trump’s administration their jobs back. Mass firings from the Defense, Treasury, Energy, Interior, Agriculture and Veterans Affairs departments did not follow the law, Alsup said.
The government declined to make witnesses available to the court although Alsup had ordered the acting head of the Office of Personnel Management to appear today. Alsup told lawyers from the Justice Department that he believed they were hiding how the firings had taken place and who was responsible. “You will not bring the people in here to be cross-examined. You’re afraid to do so because you know cross examination would reveal the truth…. I tend to doubt that you’re telling me the truth.… I’m tired of seeing you stonewall on trying to get at the truth.”
Tonight, U.S. District Judge James Bredar ordered the administration to reinstate thousands of probationary workers in the departments of Agriculture, Commerce, Education, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, Interior, Labor, Transportation, Treasury, and Veterans Affairs, as well as the U.S. Agency for International Development, the Consumer Financial Protection Bureau, the Environmental Protection Agency, the Federal Deposit Insurance Corporation, the General Service Administration, and the Small Business Administration.
Bredar said it was “likely” that “the Government has engaged in an illegal scheme spanning broad swaths of the federal workforce.” The government claimed it did not have to give advance notice of the firings because it had dismissed the probationary workers for “performance” or other individual reasons. "On the record before the Court, this isn’t true,” Bredar said. “There were no individualized assessments of employees. They were all just fired. Collectively.”
