Donald Trump isn’t willing to rule out a recession as his tariffs raise concerns for the US economy. The president stated, “I hate to predict things like that” when asked if he anticipated a downturn this year. Major US stock indexes experienced a decline on Monday after Trump mentioned that the US is in a “period of transition.”
During an appearance on Fox News’ “Sunday Morning Futures,”” the president was queried about his expectations regarding a recession, prompting his cautious reply. He elaborated, “There is a period of transition, because what we’re doing is very big. We’re bringing back wealth to America. That’s a big thing, and there are always periods of, it takes a little time, it takes a little time.”
The US stock markets reacted negatively to Trump’s remarks, with significant drops on Monday following a tumultuous week. The S&P 500 and Dow Jones Industrial Average fell about 1% each, while the tech-heavy Nasdaq, already in correction territory, lost 2%. This recent decline underscores mounting fears regarding an economic slowdown, particularly as Trump remains committed to his tariff initiatives and substantial job cuts across the federal government.
As a reflection of these concerns, the online betting platform Polymarket reported that the odds of a recession rose to 41% on Monday, up from 20% in early January. Wall Street prognosticators have also cautioned about the increasing likelihood of a downturn, even as many had initially predicted a soft landing at the year’s outset.
Goldman Sachs, on Monday, adjusted its 12-month recession probability from 15% to 20%, citing risks associated with “policy changes” under the new administration. Analysts noted, “If policy headed in the direction of our risk scenario or if the White House remained committed to its policies even in the face of much worse data, recession risk would rise further.”
Jeffrey Solomon, president of TD Cowen, expressed concern that a full-blown trade war could trigger a chain reaction leading to a US recession in the latter half of the year. He remarked, “People have to take a breather and say: ‘Wow, is this real? Is it not real? What’s going to happen with it? I can’t really afford to make any capital investments until I understand what the landscape looks like,’” during a discussion with CNBC last week. “And that’s kind of what’s happening.”
According to the Atlanta Fed’s latest GDPNow reading, real GDP is projected to decline 2.4% in the first quarter. The Brookings Institution estimated that Trump’s 25% tariff on imports from Canada and Mexico could decrease GDP by a quarter-percentage point. If both countries impose retaliatory tariffs, US GDP growth might be negatively impacted by nearly a third of a percentage point, the think tank reported this year.
Despite these apparent risks, Trump asserted that the tariffs imposed on some of the US’s primary trading partners could increase further. He dismissed the recent stock market sell-off, indicating his belief that the tariffs were establishing a “tremendous foundation” for the US economy. “I don’t think we’ll go down, but we may go up,” he stated. “Look, our country has been ripped off for many decades, for many many decades, and we’re not going to be ripped off anymore.“
