- Asked directly about the threat of a recession this year, President Trump warned there would be a “period of transition” as he renegotiates trade relationships with the help of constantly shifting tariffs.
President Donald Trump is refusing to comfort Americans worried about the effects of his tariffs policy and isn't ruling out the chance of a recession in 2025.
In an interview with Fox News on Sunday, the president would not assure Americans the economy would continue to expand under his administration.
Instead he warned of some turbulence as he implements an agenda that includes a renegotiation of unfavorable trade relationships combined with deep fiscal spending cuts.
“I hate to predict things like that, there is a period of transition,” he told the cable news channel. “It takes a little time.”
Over the past two weeks, the stock market has suffered a sharp sell-off amid fears of a “Trumpcession” brought on by uncertainty over import duties, and the three major U.S. indexes have all fallen below where they were when he took office.
Within days of Trump announcing 25% tariffs on a wide variety of imported cars, the Atlanta Federal Reserve’s real-time GDP tracker flipped negative and now predicts a contraction in the first three months of this year.
Generally speaking, economists consider two consecutive quarters of shrinking gross domestic product a technical recession.
Kevin Ford, FX and macro strategist at Convera, says, "The “hard reset” theory suggests that the new U.S. administration could be intentionally engineering a slowdown. By using tariffs, they aim to curb inflation, lower interest rates, and weaken the dollar—all to create a more stable economic landscape for Trump 47’s agenda.
"While this theory may seem far-fetched, markets are increasingly leaning into the possibility of a slowdown. Stocks have sold off, the dollar has weakened, and expectations for 2025 Fed rate cuts are rising.
"Skeptics question whether the 3-D chess strategy is too intricate for Trump’s economic cabinet, citing erratic moves on trade policy, while others point to social media hints of an economic reset agenda."
However, not everyone is anticipating a significant downturn. “I don’t think we will talk about a U.S. recession. The U.S economy is resilient, I would say, largely despite Donald Trump,” Holger Schmieding, chief economist at Berenberg Bank, told CNBC’s “Squawk Box Europe” on Monday.
Trump dismisses concerns over lack of tariff clarity
Immediately after the inauguration, the Trump administration embarked on a root-and-branch reform of the federal government with the goal of lowering taxes, keeping a lid on prices by exploiting America’s fossil fuel reserves, and driving investment in domestic manufacturing.
The president aims to re-shore blue-collar factory jobs lost to other countries through a mixture of carrots and sticks, including a never-before-seen deregulation campaign to lessen the cost burden for companies operating in the country.
Yet it is Trump’s brinkmanship over import duties and his unpredictable decisions—announcing punitive measures one day, pausing them the next—that is spooking companies.
Management cannot predict what rules will remain in place and how that will impact the price competitiveness of their goods. In these periods of uncertainty, businesses typically freeze investments until they have specifics.
Trump didn’t ease those worries on Sunday, either, as he dismissed business concerns over a lack of clarity.
“We may go up [with some tariffs], I don’t think we’ll go down but we may go up. But they have plenty of clarity, they just use that, that’s like almost a soundbite, they always say that.”
On the other hand, while laid-off federal workers have complained about Trump's government spending cuts, they have elicited less outcry from businesses, perhaps because he inherited a federal government whose spending habits were widely recognized by experts as not sustainable.
The Congressional Budget Office (CBO) predicts a fiscal deficit of $1.9 trillion, equivalent to 6.2% of the overall economy. Critics argue these levels are unprecedented for a country not facing a crisis, such as a war or pandemic.
