Massive price losses, poor consumption mood, weak job market: the fear of recession increases in the United States. Trump is gambling with his customs policy?
“We will experience a boom that we have never experienced,” Donald Trump promised in October at an election campaign event. In particular, the middle class and the labor market should grow strongly under its politics, he promised. Just seven weeks after the inauguration, economists now warn of the opposite: negative growth of the largest economy in the world. The concept of “Trumpkession” makes the round, a combination of “Trump” and “Recession” (recession).
Even Trump himself suddenly no longer excludes a recession: “I hate to predict things like this,” he replied at the weekend when asked whether he is expecting a shrinking economy. “We are in a transition phase, because what we do is enormous. We bring the prosperity back to America,” he said.
Growth forecast breaks a
The influential forecast model of the regional central bank Fed Atlanta caused a stir. It expects minus 2.8 percent for the first quarter with a quarterly growth of minus – i.e. a drastic slump in the gross domestic product.
The forecast suddenly changed the signs in February, because 2.3 percent growth had previously been expected.
US market cools down
The dynamics on the US labor market have significantly reduced. In February, only 151,000 new jobs were created, after only 125,000 in January – a severe decline compared to the 323,000 new jobs in December 2024. At the same time, the unemployment rate increased slightly to 4.1 percent. “The labor market has been slowing down for some time,” said Eckhard Schulte, head of Mainsky Asset Management. “It is not really critical yet, but the cooling accelerates very, very clearly.”
The sudden increase in planned layoffs is worrying: In February, 172,017 job cancellations were announced – an increase of 245 percent compared to the previous month and the highest value since July 2020, according to the Challenger, Gray & Christmas.
A large part is due to the cuts of the Efficiency Authority Doge under the direction of Elon Musk. Planned austerity measures by the Trump government could continue to put pressure on the labor market in the future, as many jobs depend directly or indirectly on public funds.
Less desire for consumption
The mood among US consumers has clouded significantly since the beginning of the year. Consumer confidence on the consumer barometer of the Institute Conference Board fell seven points to 98.3 points. It has reached the lowest level since June 2024.
Private consumption accounts for over two thirds of the US economy. That is why the risk of recession increases, especially in the United States when consumer expenses are falling.
Trumps Economic policy ensures uncertainty
Since taking office, Trump has made uphill with some unpredictable and irritating announcements. Critics accuse him that he uses disruption and unfair maximum demands as a strategic powder for good “deals”. But the constant back and forth, especially in the import of imports, lead to reluctance to companies and investors, Schulte said: “Uncertainty is what the economy is simply the least.” So it can already be observed that consumers and companies reset investments.
The increasing uncertainty can also be seen in market indicators. The global index for economic policy uncertainty (EPU), which searches media reporting for keywords, has been up to date since corona pandemic and thus even reaches top values of the financial crisis 2008/2009.
Inflation expected by tariffs
Trump also won the choice because he promised falling prices for consumers. But many US citizens no longer seem to believe that. Inflation expected by consumers rose to the highest value in February since May 2023, from 5.2 to 6.0 percent. Economists still see the core inflation in the USA at an excess of too high – despite Trump’s latest attempts to get the inflation with low oil prices under control.
However, the effects of tariffs have not yet been priced in the latest inflation numbers, because inflation development is based on economic activities, explains the economist Bandholz of the Kiel University of Applied Sciences. “In the long term, we know that consumer prices for US citizens are increasing when the external tariffs are increased. However, tariffs hardly bring anything in the long term.”
In the medium term, the competitiveness of the US economy could also be at risk, said Bandholz. Due to the foreclosure, US companies had fewer incentives to be innovative. “So you would sit back in some areas. We saw this particularly in the American auto industry in the 1970s and 1980s when the American car market was protected with tariffs.”
Slow growth but no recession?
Leading economists still consider the US economy to be robust. Customs and a tense labor market could push growth, but a recession is rather unlikely at short notice, says Bandholz. “I believe that the US economy is still on a relatively solid growth path and that we don’t have to worry about it at short notice.” Current negative forecasts for GDP growth (as from the regional Fed Atlanta) could be distorted, because companies handle many of their imports during these weeks in order to avoid the tariffs. The difference between imports and exports is very negative at short notice, which could then have drawn the growth forecasts significantly into the minus.
For analyst Schulte, the fear of a recession of the US economy is initially not justified. Although economic growth could slow down through Trump’s customs policy, he currently sees the growth path of the US economy at around one percent in the first and second quarter.
