With investors worrying about the impact of tariffs and the potential for an economic recession in the United States, President Trump and top officials at the White House have recently stated that there may be short-term fluctuations in the economy. However, looking ahead in the long term, new policies are expected to put the U.S. economy back on track and lay the foundation for strong future growth.
Will the U.S. economy enter a recession? Let’s hear what the experts have to say.
President Trump remarked on a Sunday program on Fox News, “I’m not willing to predict such a thing (economic recession). Because what we have to do is so big, so there will be a transitional period.” Market analysts believe that Trump’s statement indicates that he does not rule out the possibility of the U.S. entering an economic recession this year, sparking concerns in the market.
Treasury Secretary Scott Bessent, on the other hand, believes that the U.S. economy has “inherited a dose of addiction,” and the current policy contraction may lead to short-term pain, but it’s a necessary “detox process” to reduce reliance on fiscal and monetary loosening. He acknowledged signs of weakness in the U.S. economy and stated that a natural economic adjustment will occur as public spending shifts to private spending.
However, Bessent pointed out that tariffs would be a one-time price adjustment, countering the view that tariffs would exacerbate sustained inflation.
Commerce Secretary Howard Lutnick emphasized that President Trump’s policies create favorable conditions for massive investments in the U.S., which will be reflected in the economic data in the third or fourth quarter of this year.
Nevertheless, Lutnick seems to leave room for the possibility of an economic recession, stating on March 11 that even if Trump’s economic policies lead to a recession, it would still be worth it.
Concerns about the U.S. economy triggered dramatic volatility in the stock market on Monday (10th), with the Dow Jones Industrial Average dropping nearly 900 points, the S&P 500 falling 2.7%, and the Nasdaq Composite dropping 4%, while the VIX fear index surged to 30 at one point.
However, by Friday (14th), the stock market rebounded, with the S&P 500 rising 2.1%, marking the largest surge since the U.S. election, the Dow Jones climbing 650 points, the Nasdaq increasing by 2.6%, and NVIDIA rising by more than 5%. Taiwan Semiconductor ADR also rose by 1.4%. Currently, the VIX fear index has fallen to 21.78.
Generally, an economic recession is defined as widespread and sustained economic downturn, with negative growth appearing for two consecutive quarters.
Specifically, the National Bureau of Economic Research (NBER) is the authoritative organization in the United States for determining business cycles and recession. The NBER assesses six indicators to determine whether the economy is in a recession. These indicators include real personal income less transfer payments, non-farm employment, real personal consumption expenditures, wholesale retail sales, employment measured through household surveys, and industrial production.
According to the National Bureau of Economic Research, if the economy enters a recessionary period, the economic downturn will continue for several months and exhibit significant, sustained, and widespread characteristics rather than being limited to a specific industry.
Based on current economic data, the likelihood of the U.S. economy entering a recession is deemed low. According to CBS NEWS, Julia Pollack, Chief Economist at ZipRecruiter, indicated that of the six indicators tracked by the NBER, four indicators suggest that the economy is still in an expansion phase.
Furthermore, according to data from the U.S. Bureau of Labor Statistics, the February inflation report showed a 0.2% rise in inflation, with an annual inflation rate of 2.8%, which was lower than expected. Business Insider analyzed this inflation data and noted that despite concerns among the public about the impact of tariffs, the economy is progressing in the right direction.
On March 7, Federal Reserve Chairman Powell stated at a U.S. monetary policy forum that the current U.S. economic performance remains strong, but the effects of the Trump administration’s trade, immigration, fiscal, and regulatory policies on the economy remain uncertain. The Federal Reserve is closely monitoring the situation and is cautious about adjusting interest rate decisions.
Director of the National Economic Council Kevin Hassett anticipates optimistically that “the GDP in the first quarter of this year will barely maintain positive growth, then take off in the second quarter as everyone sees the effects of tax cuts.” He mentioned that the impact of tax cuts includes boosting the economy, increasing investments, and raising real wages, which will offset the negative effects of tariffs.
However, the general public is exceptionally concerned about the economic outlook. The University of Michigan’s consumer confidence survey released on the 14th showed a consumer confidence index of 57.9 in March, significantly lower than February’s 64.7 and economists’ expectations of 63, marking the lowest point since November 2022.
At the same time, pessimism among the public about inflation has risen again, with expectations for next year’s inflation increasing from 4.3% in February to 4.9%. Expectations for long-term inflation of five years or more have also risen from 3.4% in February to 3.9%, reaching the highest level of long-term inflation expectations since 1991.
According to a report from The Conference Board, a global business organization, the consumer confidence index in February decreased by 7 points, and the consumer expectations index, which measures employment, income, and business confidence, dropped by 9.3 points, falling below 80, indicating a potential recession.
In terms of banking experts, economists at Goldman Sachs have raised the probability of an economic recession in the next 12 months from 15% to 20%. Economists at JPMorgan Chase are even more pessimistic, suggesting a 40% probability of the U.S. experiencing an economic recession this year.
Furthermore, Mark Zandi, Chief Economist at Moody’s Analytics, stated in March that the risk of an economic recession could reach 35%.
Ryan Sweet, Chief U.S. Economist at the Oxford Economics Institute, analyzed the situation, stating: “Currently, due to significant policy uncertainty and federal government layoffs, the situation is unsettling, leading to low spirits among businesses, consumers, and investors.” He added, “For some, it may feel like the economy is heading towards a recession, but we have not entered one yet.”