US President Donald Trump will attend the White House Script Summit on March 7, 2025 at the White House in Washington, DC.
Evelyn Hockstein |Reuters
President Donald Trump’s return to the White House, volatility and geopolitical turbulence in global markets has led to warnings that the US economy could be heading towards a recession, but economists say the recession is not on the card yet.
“I don’t think we’ll talk about the US recession. The US economy is resilient despite Donald Trump,” Holger Schmeading, chief economist at Belenberg Bank, told CNBC’s Squawk Box Europe on Monday.
Dubbing Trump as “Agent of Confusion and Confusion,” Schmetting said the president’s “Zigzag Zigzag on Tariffs has little thought about the potential consequences of his tariff policy.”
Nevertheless, “US consumers have the money to spend (and) they will probably do that. The US labor market is reasonably solid, and with energy prices dropping a bit and perhaps some tax cuts and deregulation coming, I don’t think there’s a risk of an imminent recession,” according to Schmeading.
“But what’s become even more clear in the long run is Trump hurting trend growth to us, meaning growth in the year since 2026. And he represents a higher price for US consumers. So, in my view, the Federal Reserve (Fed) has no reason to cut his fees as Trump and president.
CNBC has contacted the White House for a response and is waiting for a reply.
International stock markets have been shaking their foundations over the past few weeks amid fears that Trump intended to revive the world trade war after Trump announced heavy import duties on goods from China, Mexico and Canada.
Confusion and uncertainty continues last Friday as the president announced that there will be a grace and delay on April 2nd on tariffs on US neighbors and closest trading partners.
Trump’s unconventional approach to trade and international diplomacy has whipped markets, whipped markets, and strategists warned that negative market sentiment is to continue with the Trump 2.0 ERA. US stock futures fell Monday morning, indicating another rocky ride for the American market at the beginning of the new trading week.
Business leaders and economists have expressed concern that tariffs will lead to further inflationary pressure on the US, which could lead to higher prices for imports for consumers.
They also warn that investment, employment and growth can suffer as consumers tighten their belts, wait for economic unpredictability and potential “stagflation,” and wait for potential “stagflation,” characterized by high inflation and high unemployment.
Rather than cutting in the range of 4.25% to 4.5% from the current benchmark rate, it will put pressure on the Fed to hold off interest rates to stimulate the economy. Lower interest rates can drive more spending, which in turn drives inflation.
Fed Chairman Jerome Powell on Friday said they could wait to see how Trump’s aggressive policy action unfolds before the central bank moves again at interest rates.
“During the transition period”
Recent economic data showing consumer trust was hit in February will be a food for the Trump administration to think about it. Last week, the Federal Reserve Bank of Atlanta, GDPNOW Bank, showed that US gross domestic product could be reduced by 2.4% during the period from January to March. A technical recession is defined as occurring when at least two consecutive quarters record negative growth.
Last week’s employment data also showed that while the US labor market is still expanding, signs of weakness could also creep up. Non-farm pay data shows that employment growth was weaker than expected in February and job growth is still stable, but the data comes amid Trump’s efforts to cut the federal workforce.
Non-farm payroll increased the seasonally adjusted 151,000 in January, past the downward revision of 125,000 in January, but below the 170,000 consensus forecast from Dow Jones, reported Friday by the Labor Bureau of Labor Statistics. The unemployment rate rose to 4.1%.
Stephen Blitz, chief US economist at TS Lombard, said the latest employment data “tells us that the economy is continuing to grow,” and did not inform the “increasing risk of a recession created by an array of Trump policies.”
But in a memo on Friday, he said, “The total number of Trump actions can distort the economy in any way, including a collapse in capital spending.”
“Please note that the president is known to accept a recession in his first year as president. It’s a free pass, denounce the former president and credit for his recovery. My basic incident is still growth and the Fed is still held.
On March 7th, 2025, US President Donald Trump makes a gesture as he boards Marine One while departing the White House on his way to Florida, Washington, DC.
Evelyn Hockstein |Reuters
Trump refused to rule out a possible recession this year, but claimed that the economy is in a “transition period” this weekend.
Asked about the Atlanta federal government’s warning about the economic contraction of Fox News channel Sunday Morning Futures, Trump appears to acknowledge that his tariff plans could have an impact on US growth.
“I hate predicting such things,” he said in an interview that aired Sunday when asked if the recession warning was a concern.
“What we’re doing is so big, so there’s a period of transition. We’re bringing wealth to America. That’s a big deal,” the White House leader added, “It takes a little time. It takes a little time.”
JPMorgan’s US Market Information Unit pointed out last week that the US economy had entered a “another period of uncertainty” given the unpredictable nature of tariffs. Analysts say they have achieved a “bearish” position against US stocks, and hope that the market will see more volatility and that US growth will grow into a “crater.”
“We already see the negative impact that policy/trade uncertainty has had on both households and business spending, so it seems like this will be huge next month. Keep an eye on unemployment rates, layoffs, notifications, and more.
While the US recession was not a basic banking case scenario, a JPMorgan analyst warned that “we could see a trade war of accelerating the length of tariffs on fraud and the new tariffs that we believe will be challenged as US GDP growth estimates are reduced.”
“Given the lack of a potential end to this escalation, the expectations that tariffs of these magnitudes, which promote both Canada and Mexico, will fall into a recession, will seek to crater and effectively lower GDP growth expectations, forcing a rethink of year-end forecasts.
