In an interview aired on Sunday, President Donald Trump refrained from ruling out the possibility of the United States facing a recession in 2025.
When asked about the potential for an economic downturn this year, Trump responded cautiously, saying, “I hate to predict things like that,” during a Fox News interview.
He noted that the country was in a “transition period” as his administration worked on what he described as “bringing wealth back to America.” He acknowledged that such efforts “take a little time.”
In contrast, Howard Lutnick, Trump’s commerce secretary, dismissed the likelihood of a recession during his appearance on NBC’s *Meet the Press*. When asked if Americans should brace for a downturn, Lutnick firmly stated, “Absolutely not.”
Despite Lutnick’s confidence, recent events have left financial markets unsettled, with Trump’s fluctuating tariff threats against key trading partners like Canada, Mexico, and China sparking uncertainty. Consumers, already grappling with inflation, are now facing the prospect of further price increases due to the tariffs.
The stock market recently experienced its worst week since the November election, and consumer confidence has taken a hit. Many shoppers, already struggling with rising costs, are now concerned about the potential for tariffs to push prices even higher.
Meanwhile, widespread layoffs across government agencies, reportedly influenced by Trump’s billionaire advisor Elon Musk, are adding to the public’s anxiety.
Economic indicators have also presented a mixed picture. The Atlanta Federal Reserve’s closely-watched index now forecasts a 2.4 per cent contraction in real GDP growth for the first quarter of 2025. If accurate, this would mark the worst quarterly performance since the peak of the Covid-19 pandemic.
Much of the economic uncertainty is linked to Trump’s unpredictable tariff policies, with shifting timelines and targeted industries leaving businesses and investors uncertain about future developments.
Kevin Hassett, Trump’s chief economic advisor, told ABC News that the longevity of the tariffs would depend on the responses of the affected countries. He hinted that a “new equilibrium” could emerge, where tariffs become a more permanent fixture if other nations fail to respond favourably.
The administration has maintained that while the economy may experience a “bumpy transition,” the overall trajectory remains positive. In his State of the Union address last Tuesday, Trump acknowledged the potential for “a little disturbance” as tariffs come into effect, but reassured the public, stating, “We’re okay with that. It won’t be much.” Similarly, Treasury Secretary Scott Bessent has cautioned about a “detox period” as the economy adjusts to reduced government spending.
Amid these uncertainties, economists have been hesitant to offer definitive forecasts. Goldman Sachs economists, citing Trump’s economic policies, have raised the likelihood of a recession in the next 12 months from 15 per cent to 20 per cent. Morgan Stanley also predicted softer-than-expected growth for the year.
While recessions are typically defined by two consecutive quarters of negative GDP growth, the US last experienced a brief recession in early 2020 as the Covid-19 pandemic led to mass job losses and economic turmoil.
Whether 2025 will see a similar downturn remains to be seen, but both financial markets and consumers are bracing for potential turbulence ahead.
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