Trump’s sharp tariff hikes last week have sent the stock market into a tailspin, raised alarm bells among Wall Street executives, and heightened many economists’ worries that the U.S. could tip into recession, according to AP.
Economists at Goldman Sachs have raised their assessment of the odds the U.S. will experience a recession — where the economy shrinks and unemployment rises — to 45%, from 35% last week. And even that forecast assumes many of the duties are negotiated away or reduced. If not, “we expect to change our forecast to a recession,” Jan Hatzius, Goldman’s chief economist, and his colleagues said in an analyst note.
Other economists are raising similar alarms, with JPMorgan putting the odds of a recession at 60% and projecting inflation will reach 4.4% by the end of this year, up from 2.8% currently.
Should the tariffs remain in place for an extended period, they will likely raise costs and uncertainty for businesses, which could reduce their willingness to hire, invest in new equipment or software, or expand into new markets. Americans could cut back on their spending in the face of higher prices. The economy could start to shrink, after expanding 2.8% in 2024.
There have been no signs yet that a recession is imminent. But one development that has sparked widespread fear is a real-time economy tracker maintained by the Federal Reserve’s Atlanta branch. It now indicates that the economy could shrink by 0.8% at an annual rate in the first three months of this year, down from 2.4% in last year’s final quarter.
The clearest signal of a recession would be a steady rise in job losses and a surge in unemployment. The government’s weekly report on the number of people seeking unemployment benefits, which is released every Thursday, is being closely watched for signs of rising layoffs. So far, applications for aid remain quite low by historical standards.
Torsten Slok, chief economist for Apollo, an asset management firm, is watching a range of real-time data and sees some signs the economy is weakening. The number of people filing for bankruptcy has risen, while visits to Las Vegas have declined a bit. Weekly visits to movie theaters this year are below their levels in recent years, he said.
