The chances of a recession in the U.S. are “close to 50/50,” Bill Clinton’s former treasury secretary warned, as major banks also raised the risk of an economic downturn.
The warnings from economists come amidst chaos and uncertainty created by President Donald Trump’s trade war on Mexico, Canada and China. The president’s refusal to rule out a recession in an interview with Maria Bartiromo on Fox News Sunday has also rocked the markets.
“I would’ve said a couple of months ago that a recession was really unlikely this year,” Larry Summers told CNN. “Now it’s getting close to 50/50.”
Summers called Trump’s tariffs a “self-inflicted wound” and the president’s back and forth with Mexico and Canada has not calmed the markets.
Monday narrowly escaped being a historically bad day on Wall Street as the Dow Jones Industrial Average lost almost 900 points at closing. Tuesday wasn’t faring much better with the Dow down more than 400 points shortly after opening.
“All the emphasis on tariffs and all the ambiguity and uncertainty has both chilled demand and caused prices to go up,” Summers said. “We are getting the worst of both worlds - concerns about inflation and an economic downturn and more uncertainty about the future and that slows everything down.”
Economists at JPMorgan Chase raised their risk of recession from 30 to 40 percent, according to the Wall Street Journal.
“We see a material risk that the U.S. falls into recession this year owing to extreme U.S. policies,” economist Bruce Kasman said.
Goldman Sachs economists raised its 12-month recession probability from 15 percent to 20 percent Friday, with the bank noting its forecast could get worse if the Trump administration remains “committed to its policies even in the face of much worse data.”
Mark Zandi, chief economist at credit rating agency Moody’s, said that the risk of a recession in the U.S. in the coming year was “uncomfortably high and rising,” estimating a 35 percent chance up from 15 percent.
“For context, the typical recession probability is 15 percent - the U.S. economy historically suffers a recession every 6 or 7 years on average,” Zandi wrote on X. “The economy will likely suffer a downturn if the Trump administration follows through on the tariff increases it has announced and maintains those tariffs for more than a few months.”
“The Stock Market Vigilantes have spoken,” president of global financial firm Yardeni Research, Ed Yardini, wrote. “They don't like tariffs, and they don't like mass firings of federal workers. That's because they don't like stagflation, and they fear that Trump 2.0's focus on these measures could cause a recession with higher inflation.”
Trump, meanwhile, has doubled down on his tariffs against Canada. “Canada is a Tariff abuser, and always has been, but the United States is not going to be subsidizing Canada any longer,” Trump fumed Monday on Truth Social. “We don’t need your Cars, we don’t need your Lumber, we don’t your Energy, and very soon, you will find that out.”
Trump’s pick for US attorney for D.C. has history of inflammatory, racist comments
US job openings rose to 7.7 million in January, a sign the job market remains sturdy
China's shipbuilding dominance poses economic and national security risks for the US, a report says
UN-backed rights experts hear Palestinians' allegations of abuse in Israeli custody during the war
Trump vows to double tariffs on steel, aluminum from Canada despite markets down
Trump to buy ‘a brand new Tesla’ in support of Elon Musk amid DOGE criticism
