Recent economic indicators have revealed a decline in consumer confidence, coinciding with President Trump's refusal to dismiss the possibility of a recession this year. The President described the current economic climate as a "period of transition," while international stock markets continue to be unsettled by fears of a global trade war. The U.S. economy faces another phase of uncertainty, according to JPMorgan's U.S. Market Intelligence unit, as newly announced import tariffs on goods from China, Mexico, and Canada raise concerns among business leaders and economists about potential inflationary pressures.
The Federal Reserve Bank of Atlanta's GDPNow tracker has projected that U.S. GDP could shrink by 2.4% for the January to March period, highlighting potential vulnerabilities in the economy. Despite the labor market's continued expansion, signs of weakening have emerged, with the unemployment rate inching up to 4.1%. Nonfarm payrolls increased by 151,000 in February, surpassing January's revised figure of 125,000. However, JPMorgan analysts warn that economic downturns could thrust the market back into what they describe as the 'Recession Playbook.'
President Trump acknowledged the possible impact of his tariff strategies on U.S. growth, while economists label him as an "agent of chaos" due to his unpredictable trade policies. A technical recession is identified when at least two consecutive quarters record negative growth.
"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." – The White House leader
The imposition of tariffs has sparked significant debate about their long-term effects on the U.S. economy. Business leaders have expressed concerns that these tariffs might lead to inflationary pressures, elevating costs for American consumers. Trump's administration argues that these measures are crucial for restoring economic strength, yet skepticism remains.
In particular, JPMorgan highlighted the detrimental effects of policy and trade uncertainty on both household and corporate expenditures.
"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
Some economists remain cautiously optimistic about the resilience of the U.S. economy. Schmieding pointed out that U.S. consumers have money to spend and are likely to do so. He noted that the labor market remains relatively firm, energy prices are decreasing slightly, and potential tax cuts and deregulation might mitigate recession risks.
"U.S. consumers have money to spend, [and] they probably will. The labor market in the U.S. remains reasonably firm, and with energy prices coming down a bit and probably some tax cuts and deregulation coming, I don't think there's an imminent recession risk," – Schmieding
Nevertheless, Schmieding acknowledged that Trump's actions might negatively affect U.S. trend growth in the long run and lead to higher prices for consumers.
"But what is becoming ever clearer in the long run, Trump is hurting U.S. trend growth, that is growth in the years beyond 2026. And he stands for higher prices for U.S. consumers, which means, in my view, the Fed [Federal Reserve] has no reason to cut rates with Trump as president, and Trump sowing chaos and confusion," – Schmieding
Steven Blitz, TS Lombard's Chief U.S. Economist, emphasized that while the economy continues to grow, Trump's policies have increased recession risks.
"the sum of Trump's actions can yet skew the economy in any which way, including an implosion of capital spending." – TS Lombard Chief U.S. Economist Steven Blitz
"the economy continues to grow" – TS Lombard Chief U.S. Economist Steven Blitz
"increased recession risks created by the array of Trump's policies." – TS Lombard Chief U.S. Economist Steven Blitz
Blitz also noted that presidents might accept downturns early in their tenure, blaming predecessors and taking credit for subsequent recoveries.
"Keep in mind that presidents have been known to accept downturns in year one of their presidency. It is a free pass, they blame the previous president and take credit for the recovery." – TS Lombard Chief U.S. Economist Steven Blitz
Despite these concerns, Blitz's base case still suggests growth with stable Federal Reserve rates.
"My base case is still growth and the Fed holding still. My base concern comes from the capital markets side, break trade and you will break the capital inflows that support the economy," – TS Lombard Chief U.S. Economist Steven Blitz