US stock markets are experiencing a sharp decline, with the Nasdaq index slipping into correction territory last week. The S&P 500 is near that level as well. This shift in market sentiment comes after President Trump’s aggressive implementation of tariffs and tariff threats against the US’s largest trading partners.
In contrast to just a month ago, when stock indices were at record highs and consumer sentiment was improving rapidly, many business executives now expect growth to slow down. Goldman Sachs predicts slower growth this year than last but still believes the odds of a recession are relatively small, at 20%.
However, experts warn that Trump’s import taxes could have a significant impact on the economy. Tariffs can raise prices for consumers, slow spending, and cause businesses to pull back on investing in new projects. Additionally, the uncertainty from Trump’s approach can delay hiring and investment.
“The longer the tariffs stay on, the more the risk of recession grows,” says Luke Tilley, chief economist at M&T Bank/Wilmington Trust.
While economists still expect the US economy to expand in the first quarter, albeit at a slower pace, some experts, including Harvard University economist Larry Summers, believe the odds of a recession are around 50-50. The National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”
The key to determining when a recession has started lies with the National Bureau of Economic Research’s Business Cycle Dating Committee, which assesses trends in hiring, income, employment, inflation-adjusted spending, retail sales, and factory output. However, it often doesn’t declare a recession until well after one has begun.
In this context, Trump’s tariffs could be a key factor to watch. The average US tariff on imported items is expected to rise 10 percentage points as a result of his actions, five times the increase from his first term. This development, combined with other factors such as government spending cuts and a slowdown in government travel, could potentially take a toll on the economy.
For now, investors and economists are closely monitoring developments to gauge the potential impact of Trump’s policies on the US economy.
Source: https://apnews.com/article/economy-trump-recession-78e4513c8990fcc9daa9fdab0dd84e45