President Donald Trump has privately expressed his awareness that his recent, aggressive tariff plan could potentially lead the U.S. economy into a recession. According to a report from The Wall Street Journal, nothing frightened Trump more than the prospect of a depression. To make this aim a reality, he’s making significant changes to the trade policy.
In a highly consequential about-face, Trump on Wednesday pledged the loosening of some retaliatory tariffs. This moment follows a dramatic stretch defined by skyrocketing bond yields and tanking equities. The rapid turnaround forged the largest one-day comeback ever in the U.S. stock market. The S&P 500 had its best day since the financial crisis of 2008.
Historically, the United States has largely gotten away with this since the Great Depression, raising tariffs. Unemployment during that period reached an astounding 25%. Monetary and fiscal policy have been crucial in preventing this. Separately, safety nets, including FDIC deposit insurance, have played a large role. The ongoing financial crisis has raised alarm among economists and investors. They are deeply concerned about what would happen to global trade if Trump imposes his very high tariffs.
Even Trump himself is starting to recognize the impending threat of recession. At the same time, a lot of economists are betting that his proposed tariff policies will kill international commerce dead. Though admonitions that an approaching recession were on its way sounded more urgently at every turn, none warned that it would turn into a depression.
Kevin Hassett, head of U.S. National Economic Council, made clear the consequences of the shrinking bond market. This change of heart was pivotal in convincing Trump to moderate his stance on trade. “Everything was moving forward in an orderly fashion,” Hassett stated in an interview with CNBC, indicating that the administration was closely monitoring market trends.
According to subsequent reports, one of the driving forces behind Trump’s decision was Treasury Secretary Scott Bessent. Bessent’s impact came in the form of providing direction on trade policy. As bond market turmoil escalated, with the 10-year Treasury yield spiking above 4.5% amid speculation that major foreign holders were selling off bonds, Trump recognized the need for a strategic pivot.
In a private moment with his economic advisors Trump spoke to the increasing panic being felt by investors. “They were getting a little bit yippy, a little bit afraid,” he remarked after announcing his decision on tariffs. This striking admission highlights the razor-thin line that Trump is trying to walk between shielding domestic interests and not spooking investors.
The White House did not immediately return a response. They got bombarded with comments concerning Trump’s concerns about his policies possibly bringing on a depression.
Even Trump admits that his tariff strategies will cause a little “pain.” He remains focused on stopping an even greater economic disaster. Observers will continue to watch how these adjustments affect both domestic markets and international trade relations in the coming weeks.