History teaches us that recessions are easy to fall into and hard to climb out of, as the damage they cause takes years to repair. The last two U.S. recessions took unprecedented government intervention and years of policy calibration to reverse.
A growing number of analysts are sounding the alarm: if President Trump doesn’t change course soon, the United States may be headed into a recession. Consumer confidence, as measured by the Conference Board, has fallen 17 points over the past three months — a red flag for economists tracking early signs of economic distress.
Moody’s Chief Economist Mark Zandi cited the decline in a post on X, predicting a recession could be on the horizon. “Remember my #1 recession watch indicator is that if confidence falls by 20 points over 3 months, consumers stop spending and [a] recession ensues about 6 months later,” he wrote.
Adding to the concern, a CNBC quarterly poll released last week found that three in five chief financial officers expect a recession to hit in the second half of 2025, while another 15 percent believe it will arrive in 2026.
At the heart of the growing unease is the Trump administration’s economic strategy, which has leaned heavily into protectionism and trade wars, all under the banner of “America First.”
Tariffs on foreign goods — particularly from key trading partners like Canada, Mexico, China, and the European Union — will undoubtedly disrupt global supply chains and drive up costs for American businesses and consumers. While these measures are promoted as tools to extract better trade deals, their short-term impact has been to inject uncertainty into financial markets and undermine investor confidence.
These tariffs, combined with a wave of job cuts across sectors, are already shaking both Main Street and Wall Street. The retrenchment has been especially visible in the federal government, where Trump’s streamlining efforts — under the guidance of Elon Musk — have triggered widespread layoffs and administrative restructuring.
Frank F. Islam: The perils of Trump’s proposed tariff trade war (February 6, 2025)
The tariffs are impacting the private sector as well. Tech companies are trimming workforces. Retailers are scaling back expansion plans. The real estate market is cooling, and small businesses are finding it increasingly difficult to access credit. Consumers — though still spending — are beginning to hold their wallets closer, especially in the face of rising prices and sluggish wage growth.
With the stock market having entered correction territory and waning consumer confidence, what began as scattered concerns has now escalated into near-daily warnings of a potential downturn.
Recessions are often described as inevitable in capitalist economies — cyclical downturns that arrive like unwelcome guests every decade or so. It’s also true, however, that many recessions are not accidents of history. They don’t happen in a vacuum. They are triggered by bad presidential policies, poor judgment, or the unintended consequences of political brinkmanship.
If a recession does grip the U.S. economy this year, it won’t be some mysterious anomaly but the logical outcome of decisions already in motion.
The president’s dismissive attitude in the face of these economic warning signs is concerning. Trump has repeatedly shrugged off recession concerns, framing the current turbulence as the “necessary cost” of confronting unfair trade practices abroad.
Read more columns by Frank F. Islam
U.S. Commerce Secretary Howard Lutnick has echoed Trump’s sentiment, insisting that the tariffs are “worth it,” even if they lead to a recession. He gone further, declaring, “There’s going to be no recession in America… I would never bet on recession. No chance.”
While such statements may offer political reassurance, they sound more than a bit detached from economic reality, much like the previous administration’s reluctance to admit that inflation was an issue.
The markets and consumers, however, don’t share the same confidence. The cooling of the stock market, coupled with sliding consumer sentiment, suggests a growing disconnect between the administration’s messaging and what Americans are actually experiencing.
Consumer confidence is the oxygen of economic expansion. Once doubt sets in — among investors, businesses, or consumers — the machinery of growth begins to slow. And , currently confidence is eroding quickly.
History teaches us that recessions are easy to fall into and hard to climb out of. The damage they cause — lost jobs, shuttered businesses, wiped-out savings — takes years to repair. The last two U.S. recessions — the Great Recession of 2007–2009 and the brief but brutal COVID-induced downturn of 2020 — took unprecedented government intervention and years of policy calibration to reverse.
Such interventions often come at a cost. The extraordinary infusion of cash into the economy by the federal government during the Biden administration contributed to runaway inflation, which may have led to the Democrats losing the White House.
To invite that level of disruption again, with an aggressive, unilateral trade policy, is short-sighted at best, and economically disastrous at worst.
The current administration’s economic approach appears driven more by ideology than strategy. Tariffs are being deployed not as temporary tools to facilitate targeted negotiations, but as blunt-force instruments to “punish” trading partners.
However, in today’s interconnected global economy, there is no such thing as clean economic separation. When tariffs drive up costs for Chinese manufacturers, those costs are often passed on to American importers — and eventually to U.S. consumers. Meanwhile, retaliatory tariffs imposed by other countries cause U.S. exporters to lose market share and revenue.
This isn’t just theoretical. Consider the case of American farmers during Trump’s first term.
Agriculture, long a reliable stronghold of Trump’s political base, suffered significantly when China retaliated against U.S. tariffs by imposing its own on American agricultural products. According to the Council on Foreign Relations, U.S. soybean exports to China — near an all-time high in 2017 — plummeted after Beijing responded with tariffs on U.S. soybeans.
In just two years, U.S. farmers lost an estimated $26 billion due to China’s retaliatory measures. To soften the blow, American taxpayers footed the bill for $28 billion in emergency subsidies. Those payments provided temporary relief to farmers but the overall damage was long-lasting. China began diversifying its suppliers, turning to countries like Brazil and Argentina for soybeans — permanently weakening U.S. dominance in that market.
The price for Trump’s tariffs was paid by: American farmers, whose global competitiveness eroded; U.S. taxpayers, who had to bail them out; and, American consumers, who faced higher prices on everyday goods.
Despite political promises in the past, tariffs haven’t revived U.S. manufacturing. The return of industrial jobs, once touted as a centerpiece of economic renewal, has failed to materialize in many regions. Instead, companies grapple with higher input costs, disrupted supply chains, and shrinking margins, limiting their ability to hire or expand.
What the U.S. economy needs now is not more economic saber-rattling, but a return to pragmatism, stability, and a long-term commitment to balanced growth.
That doesn’t mean abandoning trade enforcement altogether. Fair trade is essential, and standing up to countries that flout international rules is necessary. But the way to do that is through coalition-building and smart diplomacy, not with scattershot tariffs and public taunts.
In closing, If the president and his administration continue on their current path, based upon the assessment of experts, the question appears to be not whether there will be a recession — but when, and how severe it will be.
There is still time to change course. But that window is narrowing.
The recession watch indicator “isn’t flashing recession red, but it is flashing a bright yellow,” wrote Moody’s Zandi in his X post. He added, “The good news is that it is tariffs and other economic policies that have consumers spooked. These policies can be changed and confidence would recover. Recession avoided. The bad news is that this shift in policy course has to happen soon.”