The United States is standing at an economic crossroads, with recession fears rising sharply as President Donald Trump doubles down on his aggressive tariff policies. A Deutsche Bank survey now puts the chances of a U.S. economic downturn at 43% over the next 12 months.
As growing trade tensions continue to rattle markets, businesses, and global supply chains, many experts believe the situation is about to worsen.
Far from showing any signs of backing down, Trump is escalating his trade war even further. He has just threatened to impose a 25% tariff on countries purchasing Venezuelan oil, a move that could have significant economic consequences. This latest threat amplifies concerns that his tariff-driven strategy, intended to pressure Venezuelan President Nicolás Maduro, is pushing the U.S. closer to a self-inflicted recession. As global markets react, economists are warning that Trump’s approach is dangerously destabilizing.
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Trump has increasingly weaponized tariffs to achieve his administration’s foreign policy and economic goals. From China to Europe, Mexico to Venezuela, he has used the threat of tariffs to force compliance, punish adversaries, and protect domestic industries.
While his supporters argue that these tactics give the U.S. leverage in trade negotiations, economists warn that they could backfire, driving up costs for American consumers and businesses while slowing global economic growth.
As tariffs increase, the risk of stagflation—a scenario where growth slows while inflation remains high—becomes a real possibility. Many economists have long cautioned that Trump’s trade policies could ultimately push the U.S. into recession. His latest Venezuelan oil tariff threat only strengthens that argument.
Can the Fed Prevent a Crisis?
Federal Reserve Chair Jerome Powell has attempted to calm fears, insisting that the economy remains “strong overall.” However, his own forecasts suggest that growth is slowing. After the Fed’s two-day policy meeting last Wednesday, officials lowered their GDP growth estimate for 2025 to just 1.7%, which, excluding the COVID-19 economic collapse, would be the slowest pace since 2011.
At the same time, core inflation is now expected to hit 2.8%, well above the Fed’s 2% target. The risk is that the Fed may struggle to balance economic growth and inflation control, particularly as tariffs drive up costs across industries. While Powell has dismissed comparisons to the stagflation era of the 1980s, some experts believe that the U.S. is moving dangerously close to a similar economic situation, especially if Trump follows through on his escalating trade threats.
“The recent equity market correction was punctuated by the ‘uncertainty shock’ of ever-evolving tariff policy, with investors concerned it could morph into a slowdown or even recession,” Morgan Stanley said in a note on Monday. “What’s really at the heart of the conundrum, however, is that the U.S. might be at risk for a bout of stagflation, where growth slows and inflation remains sticky.”
Powell, however, pushed back against these concerns. “I wouldn’t say we’re in a situation that’s remotely comparable to that is likely,” he said.
Markets and Economists Sound the Alarm
Financial markets have responded with growing anxiety to Trump’s trade policies. Bond market expert Jeffrey Gundlach of DoubleLine Capital recently told CNBC that he sees the chances of a U.S. recession at “50% to 60%.” Barclays analysts noted that “market-based measures are consistent with only a modest slowing in the economy,” though the firm expects a growth rate this year of just 0.7%, barely above the recession threshold.
The UCLA Anderson School of Management, a highly respected economic forecasting center, has issued its first-ever “recession watch” due to Trump’s tariff war. Economist Clement Bohr, from UCLA Anderson, warned that Trump’s actions could directly lead to a downturn. “The downturn could come in a year or two, though it is entirely avoidable should Trump scale back his tariff threats,” he said.
Bohr also issued a stark warning about the dangers of a deeper crisis. “This Watch also serves as a warning to the current administration: be careful what you wish for, because if all your wishes come true, you could very well be the author of a deep recession,” he wrote. “And it may not simply be a standard recession that is being chaperoned into existence, but a stagflation.”
Trump Shows No Signs of Stopping
Despite these warnings, the Trump administration continues to threaten new tariffs, creating greater economic uncertainty. The 25% tariff on Venezuelan oil buyers, if enacted, could trigger a chain reaction of economic consequences. Oil prices could surge, increasing inflationary pressures. Global trade tensions could escalate, harming U.S. exports. Consumer spending could decline, further slowing economic growth. Markets could remain volatile, with investors reacting to unpredictable policy shifts.
With Trump’s trade war showing no sign of de-escalation, the risk of a U.S. recession is growing sharper by the day. If economic data continues to weaken and the administration proceeds with its latest tariff threats, the U.S. economy could be heading into a downturn much sooner than previously expected.