US President Donald Trump has refrained from confirming whether the US economy is on the brink of a recession or if consumers should expect rising prices, following his administration’s inconsistent stance on tariff threats against key trading allies.
When questioned about the possibility of a recession this year, Trump characterized the current situation as a “period of transition.” Meanwhile, Commerce Secretary Howard Lutnick maintained that no contraction is anticipated in the largest economy in the world, although he conceded that prices of certain goods might increase.
Escalating trade tensions
This statement comes in the wake of a tumultuous week for US financial markets, where investors are grappling with the uncertainty created by the administration’s reversal on vital aspects of its aggressive trade policy.
On Monday, new retaliatory tariffs from China targeting specific US agricultural products took effect, adding to the complexity of the trade landscape. In an interview aired on Fox News, which was recorded on Thursday, Trump addressed a question regarding the potential for recession:
“I hate to predict things like that. There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.”
He further stated,
“It takes a little time, but I think it should be great for us.”
Last week, the US government imposed new 25% tariffs on imports from Mexico and Canada, although many goods were exempted just two days later. Additionally, Trump increased a blanket tariff on Chinese goods to 20%. In retaliation, Beijing has introduced new taxes on various agricultural imports from the US.
Market reactions and economic projections
As of today, specific US agricultural products being exported to China, such as chicken, beef, pork, wheat, and soybeans, are now subject to tariffs ranging from 10% to 15%. Trump has accused China, Mexico, and Canada of inadequately addressing the influx of illegal drugs and migrants into the US; however, these nations have denied such allegations.
Wall Street has experienced a downturn since the onset of the trade war with the US’s primary trading partners, raising concerns among investors about the potential for higher prices and the impact on economic growth in the world’s largest economy. In a statement to NBC on Sunday, Lutnick asserted,
“Foreign goods may get a little more expensive. But American goods are going to get cheaper.”
However, he firmly declared, “Absolutely not… There’s going to be no recession in America.”
Former US Commerce Department official Frank Lavin expressed to the BBC that he believes the trade war is unlikely to spiral out of control. He opined that while tariffs may eventually diminish, they will continue to impose an “extra burden on the US economy.”