Whether it is the ‘Art of the Deal’ or just pure chaos in motion, President Trump has cemented his reputation for unpredictability in economic policy. Ratcheting tariffs on Chinese goods up to 125%, while issuing a surprise 90-day pause for countries that haven’t retaliated, has left markets in a state of cautious relief – but unsure of what comes next.
“You know what the direction is, you just don’t know what the destination is,” said Federal Reserve Bank of Richmond President Tom Barkin, summarizing the economic uncertainty of the current situation.
Odds of Recession Uncomfortably High
Economists have sounded the alarm about growing recession risks. Yesterday morning, Goldman Sachs economists announced the forecast of a U.S. recession and, several hours later, retracted it following President Donald Trump’s afternoon announcement of a 90-day pause on new tariffs. However, they still anticipate a significant economic slowdown due to policy uncertainty. The initial recession prediction was based on newly implemented country-specific tariffs but was reversed after the tariff pause was announced, which led to a surge in the stock market. Despite this, Goldman Sachs now predicts a modest economic growth rate of 0.5% in 2025, with a 45% chance of a recession within the next year.
Meanwhile, Citigroup economists have stated that the pause in tariffs (excluding China) does not eliminate the risk of slowing growth and increasing inflation. Further, JPMorgan is projecting a 60% chance of a global recession by the end of 2025 and anticipating a two-quarter U.S. GDP contraction in late 2025. The bank anticipates that the Federal Reserve will delay interest rate cuts until September due to the latest developments.
The prediction market Kalshi now shows recession odds at 55%, down from a 70% peak after China announced retaliatory tariffs.
Consumer and Business Confidence Slipping
Declining consumer and business confidence is amplifying economic concerns. The Conference Board’s Expectations Index dropped to 65.2 in March, its lowest level in 12 years and well below the critical threshold of 80 that typically signals a recession. This marks four consecutive months of worsening consumer sentiment.
Business leaders are also expressing growing pessimism about future conditions. The CEO Confidence Index fell a historic 22 points in Q1. According to economic research, uncertainty typically leads companies to postpone investments, reduce hiring, and become more reluctant to adopt new technologies – all factors that further dampen economic growth.
The Path Forward Remains Uncertain
It remains unclear whether the administration is genuinely seeking more open trade or aiming to establish higher permanent trade barriers to encourage domestic manufacturing.
As evidenced yesterday, predictability in economic policy under the Trump administration has become the exception rather than the rule, but the immediate economic impact is already being felt.