
The return of President Donald Trump to the White House has reignited concerns about the stability of the U.S. economy, with escalating global market volatility and geopolitical turbulence stoking fears of a potential recession.
Despite mounting warnings from economic experts, Trump has doubled down on his aggressive tariff policies, targeting not only geopolitical rivals but also traditional U.S. allies and key economic partners.
Economic experts have repeatedly cautioned that Trump’s tariff policies could have far-reaching negative impacts on the U.S. economy. Holger Schmieding, chief economist at Berenberg Bank, labeled Trump an “agent of chaos and confusion,” criticizing the president’s erratic approach to trade.
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“Trump’s zigzagging on tariffs shows that he has little idea of the potential consequences of his tariff policies,” Schmieding told CNBC’s Squawk Box Europe.
However, Schmieding emphasized that while a recession may not be imminent, Trump’s policies are undermining long-term U.S. growth prospects.
“What is becoming ever clearer in the long run, Trump is hurting U.S. trend growth, that is growth in the years beyond 2026,” he noted.
Schmieding warned that Trump’s trade measures would likely lead to higher consumer prices and argued that the Federal Reserve (Fed) would have little reason to cut interest rates under Trump’s unpredictable leadership.
Tariffs Targeting Allies and Key Partners
Trump has not hesitated to impose tariffs on imports from countries traditionally considered close allies of the United States. His administration recently announced steep import tariffs on goods from China, Mexico, and Canada, leading to a fresh wave of uncertainty in international markets. While tariffs on U.S. neighbors and closest trading partners were delayed until April 2, the temporary reprieve did little to calm investor nerves.
The confusion surrounding Trump’s trade policies has left financial markets reeling. U.S. stock futures fell earlier this week, suggesting continued volatility. Analysts at JPMorgan’s U.S. Market Intelligence unit have adopted a “bearish” stance, anticipating prolonged market turbulence and a potential “cratering” of U.S. economic growth.
“We have already seen the negative impact that policy/trade uncertainty has had on both household and corporate spending, so it seems likely that we see a larger magnitude of this over the next month,” JPMorgan analysts warned. They advised monitoring key economic indicators such as unemployment rates and corporate layoffs for signs of a potential recession.
Economic Data Presents Mixed Signals
Recent U.S. economic data has been a mixed bag, showing both resilience and emerging signs of strain. The latest nonfarm payrolls report showed an increase of 151,000 jobs in February, falling short of the 170,000 jobs forecasted by analysts. The unemployment rate ticked up to 4.1%, raising concerns about a potential slowdown in the labor market, per CNBC.
Steven Blitz, chief U.S. economist at TS Lombard, maintained that the latest jobs data did not indicate heightened recession risks. However, he cautioned that Trump’s policies could unpredictably affect the economy.
“The sum of Trump’s actions can yet skew the economy in any which way, including an implosion of capital spending,” Blitz noted.
The Federal Reserve Bank of Atlanta’s GDPNow tracker projected a 2.4% contraction in U.S. GDP for the first quarter, raising the specter of a technical recession if the economy shrinks for two consecutive quarters. Despite this, the White House has not indicated a change in course on tariffs.
Trump has remained steadfast in his tariff strategy, brushing aside recession warnings from economists and market analysts. In an interview on Fox News’ Sunday Morning Futures, Trump described the current economic conditions as a “period of transition” and suggested that his policies were part of a broader effort to bring wealth back to the United States.
“There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing,” he said. “It takes a little time. It takes a little time.” Trump did not rule out the possibility of a recession but suggested that short-term economic pain was necessary for long-term gain.
However, Trump’s defiance could backfire if his policies trigger the very downturn he seeks to avoid. Many have argued that his tariffs could lead to stagflation—a dangerous mix of high inflation and high unemployment—forcing the Fed to keep interest rates steady instead of cutting them to stimulate growth.
Analysts Adopt a Bearish Outlook
Trump’s refusal to pivot away from his tariff policies has left analysts bracing for continued market volatility. JPMorgan’s analysts expressed concern over the potential escalation of the trade war, warning that this could drive both Canada and Mexico into recession and severely undermine U.S. GDP growth.
“Given the lack of a potential end to this escalation, the expectation is that tariffs of this magnitude will drive both Canada and Mexico into a recession,” JPMorgan warned, explaining their shift to a “Tactically Bearish” market outlook. They noted that prolonged tariffs could lead to lower earnings, forcing analysts to revise year-end forecasts downward.
Global Impact: Risks to Trade and Investment
The potential fallout from Trump’s tariffs extends beyond U.S. borders. Business leaders and economists have voiced concerns that higher tariffs could lead to increased inflationary pressures in the U.S., with consumers likely to bear the brunt of higher prices on imported goods. They also warn that investment, job creation, and economic growth could all suffer as businesses and consumers brace for a period of economic unpredictability.
Trump’s approach to trade has also strained diplomatic ties, with affected countries having imposed or considering retaliatory tariffs. This could create a tit-for-tat scenario, amplifying economic risks and further unsettling global markets. Economists worry that if the trade war escalates, the effects could ripple through supply chains, disrupting industries from technology to agriculture.