By Joe Light

President Donald Trump touted supposed waste and fraud found by Elon Musk's Department of Government Efficiency during a joint address to Congress, while also doubling down on his strategy of levying widespread tariffs across the globe during his joint address to Congress on Tuesday evening.

He also portrayed former President Joe Biden's economy as a "catastrophe" and laid blame on Biden for recent price rises in some goods like eggs.

The president's speech comes as judges question the legality of many of Trump's early actions to cut costs in government and as the economy shows early signs of losing its footing.

"Whatever they tariff us, we tariff them. Whatever they tax us, we tax them. If they do non-monetary tariffs to keep us out of their market, then we do non-monetary barriers to keep them out of our market," the president will say, according to excerpts released by the White House. "We will take in trillions of dollars and create jobs like we have never seen before."

Trump's speech on Tuesday isn't technically a State of the Union address, given that it is occurring in his first year, but for all intents and purposes, that is what it is. The "renewal of the American dream," was the theme, the White House has said.

"America is back," Trump said, adding that he believed the election showed a strong mandate for his policies.

The beginning of Trump's speech was marred by interruptions by Rep. Al Green (D., Texas) who heckled the president and yelled that Trump didn't have a mandate. After ignoring exhortations to sit down, House Speaker Mike Johnson ordered the Sergeant at Arms to remove Green from the Chamber.

So far, financial markets aren't reacting well to Trump's tariff policies. Stock prices fell in reaction to the launch of Trump's trade war and the general uncertainty about policy he has unleashed. Recent economic surveys have shown deteriorating consumer confidence and rising inflation fears.

On Tuesday, the S&P 500 fell 1.2%, erasing all the gains in the index since Trump's victory last November. The Nasdaq Composite, which fell 0.4%, is already below its pre-election level.

In the early portion of his remarks, Trump ticked off a series of culture-war-related efforts, such as renaming the Gulf of Mexico the "Gulf of America" and banning diversity, equity, and inclusion efforts in government.

"Our country will be woke no longer," Trump said.

The remainder of his speech could offer hints on what comes next on three critical fronts. These are the items to watch.

DOGE Cost Cutting

Trump trumpeted firings and other cost cuts being pursued by Elon Musk's "Department of Government Efficiency." Under DOGE's direction, federal agencies have attempted to lay off thousands of federal employees and to close entire agencies, such as the U.S. Agency for International Development. Trump and Musk have promised that tens of thousands of layoffs are to come.

"The days of unelected bureaucrats are over," Trump said.

Trump ticked off a series of savings discovered by DOGE, though not all of the president's assertions were factual. Trump, for example, suggested that Social Security is paying benefits out to Americans with ages of as much as more than 300 years old. In truth, the Social Security Administration has said such ages most often come from missing death dates or database errors, and that the program has a policy of automatically stopping payments after age 115.

DOGE itself is under attack. Many of the cost cuts that the effort has claimed were either not real or happened under prior administrations, leading DOGE to continually modify a running tally of its results.

Federal judges have also already suggested that some of its actions have been illegal, violating protections meant to insulate civil service workers from being fired for political reasons. The Justice Department has struggled at times in court to explain the government's plans, the status of workforce reductions, and even who, exactly, is in charge of DOGE.

Some agencies that Musk has said he seeks to shut -- including USAID and the Consumer Financial Protection Bureau -- were created by Congress, which will likely lead to judicial pushback on efforts to close them completely. The speech is a chance for Trump to better articulate what exactly he hopes to accomplish with DOGE and whether he plans to seek congressional backing for its actions.

If he plans to push ahead without Congress, that would cause extreme uncertainty throughout government as courts slowly work through which of its actions pass legal muster. It could also threaten a government shutdown as soon as next week because Democrats say they won't support a funding resolution that seeks to enshrine DOGE's cuts in law.

Tariffs

Tuesday marked the start of 25% tariffs on most imports from Canada and Mexico -- the U.S.'s two largest trading partners. The president on Monday also signed an order raising tariffs on Chinese imports an additional 10%.

Trump has said the tariffs are in response to the countries doing too little to stem the flow of migrants and illegal fentanyl into the U.S. The White House last week said the president wants to see the number of drug-related deaths and imports to drop before abandoning the levies. Canada and China have already retaliated, and Mexico has said it plans to do so, kicking off a trade war.

But it is clear that the president also sees tariffs as the primary tool for reordering the world economy in favor of U.S. manufacturers. During the speech, investors will be looking for any signs for how long the trade war might last and what the president's next targets could be. If countries have an opening to make concessions and lift the tariffs, that would be positive for markets.

Taxes

Perhaps the market's biggest uncertainty -- and the area Congress is most focused on -- is whether lawmakers will extend tax cuts for individuals set to expire at the end of this year that were part of Trump's 2017 tax law.

Trump has spent relatively little time talking about tax reform, at least compared with tariffs, leaving the heavy lifting to Congress. Big questions include whether Congress will try to include any of the cuts that Trump promised on the campaign trail, such as no tax on tips, overtime, or Social Security, and lowering the corporate tax rate even further to 15%.

"Fiscal constraints and political realities, however, make attaining these goals a long shot," said Stifel policy strategist Brian Gardner in a research note on Tuesday.

Merely extending the 2017 tax cuts would cost $4.6 trillion over the next decade, according to the Congressional Budget Office. Deficit hawks are keen on finding ways to reduce some of that cost, such as by eliminating some tax breaks on electric vehicles from President Joe Biden's Inflation Reduction Act. A budget resolution passed by the House of Representatives last week also suggests that large cuts could be coming for Medicaid.

Some Republicans, who have a razor-thin majority in the House, have gone so far as to suggest that Congress pretend that extending the tax cuts won't add to the deficit. Democrats and other Republicans have derided that as a gimmick.

Trump could use his speech to articulate which tax cuts he views as the biggest priority and where Congress should find places to cut to offset them.

Write to Joe Light at joe.light@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 04, 2025 22:02 ET (03:02 GMT)

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