Explosive 35% Recession Risk as Trump Tariffs Shake Economy

By Newsroom

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Newsroom

Posted: April 2, 2025 at 10:20 pm, Updated: April 2, 2025 at 10:20 pm

Photo: Spencer Platt/Getty Images

Trump Tariffs Shake Economy

Donald Trump has set his sights on tariffs in his second term. He imposed a series of taxes on other nations as a clear sign of his “America First” policy. Trump plans even more tariffs and calls the upcoming day the nation’s “Liberation Day.” His actions aim to protect American jobs and industries, yet many experts warn that these steps could hurt the national economy.

The president has taken a bold stance by using tariffs as a tool. He believes these measures will force trading partners to change their policies. Trump’s approach is designed to put American businesses first, even if it causes tension with other nations. Many economists now see these moves as risky and potentially damaging.

Goldman Sachs recently warned its clients of a looming recession. The bank raised its internal probability metrics to show a 35% chance of a recession within the next 12 months. This jump from a previous 20% chance has alarmed many in the financial world. Goldman Sachs also increased its inflation estimate and slashed its 2025 GDP forecast to just 1%. In addition, the bank raised its year-end unemployment rate outlook by 0.3 percentage points to 4.5%. They explained that “statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies” played a role in their decision. This news has many investors feeling uneasy about the future.

S&P Global has also joined the chorus of warning voices. The firm said its GDP growth forecasts fell because of “U.S. tariff effects and spillovers from a steeper decline in U.S. sequential growth.” S&P Global expects European growth to pick up in 2026 despite a dip this year, while it sees China’s growth as remaining “stable.” The report notes, “The risks to our baseline are firmly on the downside. We are watching the effects on demand from protracted U.S. policy uncertainty.” Many experts fear that these issues could slow down overall economic growth even more.

CNBC recently featured Mohamed El-Erian on its Squawk Box. El-Erian, the chief economic officer at Allianz, shared his view on the tariffs. He explained that the tariffs could lead to one of two outcomes. Either the affected countries agree to new rules for a “fairer trading system,” or they will impose their own tariffs against the United States. In the latter case, the result would be several rounds of tit-for-tat tariffs, leading to a state known as stagflation. His insights add a human touch to the economic debate and reflect deep concern about the current trade war.

A CNBC survey of economists has deepened these concerns further. The survey combined forecasts from more than a dozen economists. They found that “policy uncertainty and sweeping new tariffs from the Trump administration are combining to create a stagflationary outlook for the U.S. economy.” The survey shows that first quarter growth may only reach an anemic 0.3%, a big drop from the 2.3% growth seen in the fourth quarter of 2024. This would be the weakest growth since the economy emerged from the pandemic. Core PCE inflation, the Fed’s favored measure, is expected to stay near 2.9% for most of the year before declining in the final quarter.

J.P. Morgan has also adjusted its outlook for the economy. On March 14, the bank announced that it revised its growth forecast for 2025. J.P. Morgan now predicts a GDP growth of 1.6%, which is a 0.3% decrease from its earlier estimates. The firm explained that the ongoing tariffs and potential retaliatory measures from trading partners created uncertainty. Michael Feroli, J.P. Morgan’s chief U.S. economist, said, “Heightened trade policy uncertainty should weigh on activity growth, particularly for capital spending.” He also mentioned that the tariffs would bump up consumer prices by 0.2 percentage points and that retaliatory tariffs would further drag down export growth. His comments highlight the immediate risks to the economy.

Mark Zandi, chief economist at Moody’s Analytics, has become one of the loudest voices of warning. He recently raised his odds for a recession from 15% at the beginning of 2025 to 40% now. Although Zandi believes the overall recession risk remains low, he called the recent economic data “disconcerting.” He pointed to the shifting policies from the White House as a main concern. Zandi told ABC News on Monday that investors are nervous after Trump made it clear he will announce new tariffs this week. He stated, “That’s the fodder for an economic downturn. Obviously, that’s not good for business. That’s not good for profits. That’s not good for stock prices.” His words resonate with many who fear that these policies could disrupt everyday business and hurt consumers.

The auto industry now faces its own set of challenges amid the tariffs. Yale’s Budget Lab provided a detailed analysis that caught the attention of many. According to the analysis, the 25 percent auto tariffs announced last week will drive up new-car prices by an average of 31%. Edmunds reported that the average price of a new car in the US was about $48,000 in the third quarter of 2024. Yale’s study suggests that this tariff effect could add approximately $6,400 to the price of an average car. Imported models or domestic models with high import content might see even higher price increases. In contrast, prices for new domestic cars would likely increase by about 3.2%. This has caused concern among consumers who fear that buying a car might soon become much more expensive.

Wedbush analyst Dan Ives also weighed in on the auto tariff issue. Ives told investors in a research note that the tariffs would send the auto industry into “pure chaos.” He explained that his team of auto-industry experts believes the new tariffs could add between $5,000 and $15,000 to the price of a new car. Ives stated, “The winner in our view from this tariff is no one.” He described the auto tariff as a back breaker and even called it an Armageddon for the global auto industry. He estimated that the tariff measures would add up to $100 billion in annual costs to the industry, and these costs would be passed directly to the consumer. His analysis paints a grim picture for the auto sector and highlights the broader economic risks associated with these policies.

Trump’s use of tariffs has not only rattled the markets but also stirred deep debates about trade policy. Many people see the tariffs as a way to protect American jobs. However, the costs of these measures may far outweigh the benefits. Critics argue that these tariffs could trigger a series of retaliatory moves from other countries, escalating the trade war further. They fear that such a scenario could stunt economic growth and lead to long-term harm for American workers and businesses.

Trump’s policies have always sparked heated debate. His supporters appreciate his strong stance on trade and his willingness to challenge global norms. On the other hand, economic experts warn that these policies could have severe consequences. They argue that while the tariffs may protect certain industries in the short term, they could also lead to slower growth, higher inflation, and job losses across multiple sectors. This debate continues to fuel discussions in boardrooms and living rooms across the country.

The trade war, which has been a central theme of Trump’s presidency, now looks more dangerous than ever. With each new tariff announcement, the risk of a full-blown economic downturn grows. Many worry that the current measures might be the tipping point that pushes the nation into a recession. The mixed signals from various experts add to the uncertainty that consumers and investors feel today. There is a growing sense that while the tariffs may offer some short-term protection, the long-term economic costs could be devastating.

Investors and everyday citizens alike watch these developments with growing concern. Financial markets react sharply to any hints of further policy changes. Every statement from the White House now carries extra weight. Experts stress that the uncertainty surrounding U.S. trade policies is one of the biggest threats to economic stability. As Trump continues to push forward with his tariff agenda, many remain uncertain about the future. They worry that the damage could be far-reaching, affecting not just Wall Street but Main Street as well.

Amid the chaos, some analysts suggest that there could be a silver lining. They believe that if trading partners agree to new, fairer rules, the tariffs might lead to a more balanced global trading system. Others are less optimistic, predicting that retaliatory measures will lead to prolonged periods of economic stagnation. This division of opinion only adds to the anxiety in the markets and among consumers who struggle to understand what lies ahead.

The current situation has many experts calling for caution. They urge policymakers to think about the long-term impacts rather than just immediate gains. They point out that while the tariffs might seem like a quick fix to protect domestic industries, the broader economic fallout could be severe. Consumers may face higher prices, and businesses might find it harder to invest in growth. With every new policy announcement, the stakes grow higher for the U.S. economy.

As the debate rages on, the auto industry continues to be one of the hardest hit. Car buyers face a future where new vehicles cost significantly more. This could lead to fewer sales and even more economic trouble for auto dealerships. The chain reaction might also affect suppliers and other related industries. For many, this is not just about numbers on a spreadsheet—it is about real lives and livelihoods. Car owners, potential buyers, and workers in the auto industry now worry about their future in an uncertain market.

Trump’s tariffs have also created a ripple effect on international trade. Countries around the world now face the dilemma of whether to retaliate or find alternative solutions. Many nations fear that joining in a tariff war could hurt their own economies. The pressure builds on both sides, and the trade war shows no sign of cooling down. Each new measure brings a mix of hope and anxiety to the global stage.

The intense debate over Trump’s tariff policy brings up questions about the future of international trade. Some experts say that the current strategy might force a much-needed change in how countries deal with each other. Others warn that this could be a dangerous path that leads to economic isolation. The uncertainty makes it hard for businesses to plan ahead, and the global market remains on edge.

In this environment of uncertainty, policymakers must tread carefully. They need to balance the desire to protect domestic industries with the risk of long-term economic damage. The opinions from Goldman Sachs, S&P Global, J.P. Morgan, Moody’s, and other experts offer a glimpse into a future that might be fraught with challenges. Their warnings serve as a reminder that aggressive policies can have unintended side effects. They caution that the nation could pay a high price for these tariff moves.

Every new announcement from the White House now carries an air of suspense. Investors, consumers, and business leaders wait with bated breath for the next development. The economy, already weakened by previous shocks, stands on a fragile edge. Many hope that a balanced approach can still be found—a way to protect American interests without triggering a severe downturn.

The impact of these tariffs is not limited to financial markets alone. Ordinary people across the country feel the pressure too. Higher prices on everyday goods, especially in the auto industry, may strain family budgets. Workers fear that fewer sales and rising costs will lead to job cuts. This real-world effect makes the debate over tariffs more than just an economic discussion—it is about the future of American households.

Trump’s tariff strategy has polarized opinions and stirred strong emotions. Some applaud his bold moves to protect American jobs and industries. Others decry the heavy-handed tactics and warn of a dangerous spiral into recession. This clash of views creates a complex picture of a nation at a crossroads. The decisions made now will shape the economic landscape for years to come.

The coming weeks and months will likely bring more surprises. As the administration announces further measures, experts and citizens alike will be forced to reassess their hopes and fears. The trade war could either lead to a fairer global system or spiral into a cycle of retaliatory actions that harm everyone. For now, the only certainty is that uncertainty reigns. All eyes remain on the president and his next move, as the nation grapples with these challenging times.

In the midst of all this, the human cost of economic policies stands out. Families, small business owners, and workers in industries like auto manufacturing face difficult choices. They must adapt to a market that seems to be changing by the day. The warnings from leading financial institutions underscore the risks ahead. They remind us that economic policies have real impacts on everyday lives.

The debate about Trump’s tariffs has grown into a full-blown discussion about the future of American prosperity. With experts raising warnings about recession risks, inflation, and the slowdown in growth, many fear that the economic damage could be profound. Consumers are bracing themselves for higher prices, and businesses are preparing for tougher times ahead. The decisions made now will have lasting consequences that stretch far beyond boardrooms and trading floors.

In summary, the aggressive tariff policies pushed by President Trump have set off a chain reaction that is shaking the very foundations of the U.S. economy. Leading financial experts from Goldman Sachs, S&P Global, J.P. Morgan, Moody’s Analytics, and others warn of a 35% to 40% chance of recession. Their insights indicate that while the tariffs may offer short-term protection for some industries, they could lead to higher consumer prices, reduced growth, and significant disruptions in sectors such as the auto industry. The warnings from these experts come at a time when trade tensions are high, and the future remains uncertain for American businesses and consumers alike.