Kennesaw State Economist on Trump's Tariffs, DOGE

CUMBERLAND — After years of pandemic-related uncertainty, Kennesaw State University economist Roger Tutterow thought the American economy had finally regained its footing.

"And then along comes a change in the business and political environment which has raised the level of uncertainty," Tutterow told bankers, customers, and real estate professionals at the annual economic forecast forum held by Synovus bank at the Cobb Energy Performing Arts Centre Wednesday.

Tutterow said sweeping changes ushered in by President Donald Trump, from threatened tariffs to the efforts of Elon Musk and the newly minted Department of Government Efficiency (DOGE), are driving consumer perception of the economy and could muddy job market data.

"Those of us who believe in the power of free markets, those of us who believe the economy should be diligent about preventing (waste) in the size of government, celebrate efforts to try to rightsize government," he said. "But some of that may include some significant layoffs in the federal system. And when that occurs, it could have a dampening effect nationwide on employment. So be aware over the next several months and quarters, that there is an increased risk that this employment data gets dirty because of the efforts of Team DOGE."

While Tutterow said tariffs will certainly be a "hammer for (Trump) to use to implement other aspects of geopolitical policy," as evidenced by the 25% tariffs he said will be placed on Canadian and Mexican goods next week, people shouldn't panic just yet.

"I would encourage people not to get overly concerned," Tutterow said. "Let's wait and see what is rhetoric and what is actually policy positions. Can tariffs raise prices? Sure," Tutterow said.

"But ultimately, whether tariffs cause inflation or not comes down to the other countries' producers and what kind of impression they'll take on their margin, the degree to which the value of the U.S. dollar changes against other currencies — a variety of factors go in to determine what percentage of the tariff actually gets passed on to American households."

He said consumer sentiment — how people feel about the economy — is still a key factor in understanding the economy and spending habits.

According to the University of Michigan's consumer sentiment index, American faith in the economy hit an all-time low in 2022. Tutterow attributed that to the 9% inflation at the time. He said that consumer sentiment has been slowly on the rise since then. But this month, the University of Michigan reported it fell nearly 10%.

Some good news, Tutterow said, is that inflation is down to 3% from the 9% hike seen in 2022. But he said America's 2% target is still a ways away.

"We've gotten from 9 (percent) to 3 (percent). But the last mile of the journey is always the hardest," Tutterow said.

Tutterow also said he and his fellow economists are no longer sounding the alarm on a looming recession.

"I am absolutely thrilled that my brethren and I were wrong in 2023 and celebrate the fact that the economy, while it does still have challenges, continues to expand here in the first quarter of 2025," he said.

Rod Knowles, former president and CEO of Chattahoochee Bank, said he was happy to hear economists are no longer worried about a recession.

He added that while he personally supports the efforts of DOGE and thinks the idea of increasing efficiency should be taken to all levels of government, it's too soon to say what the lasting impacts of Trump's economic shakeup will be.

"I think there's always room for improving efficiency ... I think what's happening in Washington should be happening systemically all over the country," he said. ".. It's so early in. We see these things that appear to be radical, on one hand, but we haven't had time to sit around and simmer and see what happens."