In an interview that aired on Sunday, President Donald Trump refused to rule out the idea that the US could go into a recession this year.
He said, “I hate to predict things like that,” in response to a direct question about a potential 2025 recession from a Fox News interviewer.
He stated, “It takes a little time, because what we are doing is very substantial — we are returning wealth back to America,” so there is a transitional period.
When questioned on Sunday about the likelihood of a recession, however, Trump’s commerce secretary, Howard Lutnick, was more definite.
He responded, “Absolutely not,” when asked if Americans should prepare for a downturn on NBC’s “Meet the Press.”
Trump’s intermittent threats of tariffs against China, Canada, Mexico, and other countries have caused financial markets in the US to tremble and consumers to be uncertain about the year ahead.
The worst week for stock markets since the November election just finished.
Consumer confidence metrics are declining as consumers, who have already been negatively impacted by years of inflation, prepare for the potential price increases brought on by tariffs.
Furthermore, widespread federal layoffs being orchestrated by Elon Musk, Trump’s billionaire advisor, raise even more alarm.
According to a closely followed Atlanta Federal Reserve indicator, real GDP growth in the first quarter of this year is expected to drop by 2.4 percent, the lowest outcome since the peak of the Covid-19 outbreak.
Trump’s changing tariff approach is largely to blame for the uncertainty as investors and businesses attempt to figure out what will happen next. Both the sectors being targeted and the effective dates have changed.
On ABC, Trump’s chief economic advisor Kevin Hassett was questioned about whether tariffs were mostly a temporary measure or if they would end up being permanent.
That relied on how the targeted nations behaved, according to Hassett. He warned that if they did not react favorably, there might be a “new equilibrium” of ongoing tariffs.
Although the economy will go through a potentially difficult “transition,” the government has maintained that things are moving in the right direction.
“We are cool with it,” Trump said in his State of the Union address on Tuesday, warning Americans to expect “a little turbulence” as tariffs take effect. There will not be much.
Additionally, Scott Bessent, his Treasury Secretary, has issued a warning about a “detox time” when government expenditure declines.
Economists have been hesitant to make definitive projections because of the uncertainties.
Citing Trump’s plans, Goldman Sachs economists have increased their forecast of a recession over the next 12 months from 15% to 20%.
Additionally, Morgan Stanley forecast “softer growth this year” than was previously anticipated.
Two consecutive quarters of weak or negative GDP growth are commonly referred to as recessions.
Early in 2020, as the Covid epidemic expanded, the US experienced a temporary recession. Millions of jobs were lost.
