The chances of a recession in the US have increased due to the implementation of tariffs, according to Alec Kersman, managing director and head of Asia-Pacific at Pimco. The probability of a recession is now around 35%, up from 15% estimated last December.
However, Kersman notes that the firm’s base case scenario still predicts a 1-1.5% economic growth, indicating an expansion despite being lower than earlier expectations. Kamal Bhatia, president and CEO of Principal Asset Management, suggests that tariffs could boost domestic consumption, leading to more than expected GDP growth.
Trade wars can cause countries to become “insular,” sparking local spending and boosting the economy. Consumer spending accounts for two-thirds of US GDP, making this a high-probability outcome. Geopolitics are also playing a larger role in economies, with tariffs changing investor sentiment.
Trump recently doubled tariffs on Canadian steel and aluminum imports to 50% following Ontario Premier Doug Ford’s response to the surcharge. However, Trump later backtracked after agreeing to renew trade talks with Canada.
Source: https://www.cnbc.com/2025/03/12/tariffs-have-increased-the-probability-of-a-us-recession-pimco.html