Sometimes the economic consensus gets blindsided. According to Lou Basenese, Chief Market Strategist at The Basenese Group, President Donald Trump's aggressive tariff strategy has done exactly that—defying predictions and leaving mainstream economists scrambling to explain the results.

The Big Stick That Didn't Break Anything

Speaking on Fox Business' "Kudlow" Thursday, Basenese described how the administration rolled out 83% tariffs "out of the gate" as a negotiating weapon. The move brought America's largest trading partners to the table, which was the point. But here's where things get interesting: the expected inflationary surge never materialized.

"What surprised most economists," Basenese said, was that "it just did not lead to any inflation." He credits deflation from deregulation efforts and AI advances with offsetting the price pressures everyone assumed would hit consumers.

"The economists were completely wrong," he declared, pointing to the U.S. economy's impressive 4.3% GDP growth in the third quarter. That number sailed past estimates of 3.3% and left the Federal Reserve's own 1.6% forecast looking awfully conservative. "You cannot argue with the results."

Basenese also highlighted real estate as a potential accelerator. The sector dragged GDP down by 0.2% this quarter, but he believes Trump could turn that around. "If the President can reinvigorate real estate, which I believe he can, we can see 5% GDP growth," he said. The last time the country saw growth like that? Over three decades ago during Ronald Reagan's administration.

Not Everyone's Buying It

Of course, strong numbers always attract skeptics. Economist David Rosenberg of Rosenberg Research called the headline figures "fugazi," arguing the real growth rate sits at just 0.8%. He attributes the inflated number to government spending, falling imports, and Americans burning through their savings.

Rosenberg went further, questioning the inflation data itself. "If you think the CPI data was manipulated, so was today's GDP report," he posted on X last week.

Meanwhile, economist Paul Krugman sees a K-shaped economy emerging—wealthy Americans doing great while working families struggle. "Trump may claim that we are economically 'the hottest country in the world,' but the truth is that we last had a hot labor market back in 2023-24," he said, blaming what he calls a frozen job market on Trump's "erratic tariff policies."

So who's right? The optimists pointing to blockbuster GDP numbers, or the critics saying it's all smoke and mirrors? The debate continues, but one thing's certain: this isn't how most economists thought the tariff story would play out.