I'm an Economist: Here's Why I Believe Trump's Economic Moves May Lead to a Recession
President Donald Trump's aggressive economic policies, including sweeping tariffs and confrontational trade strategies, are raising alarms among economists about a potential recession.
Learn More: Trump Isn't Ruling Out a Recession This Year — What Could That Mean for Your Wallet?
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GOBankingRates spoke to economists about the risks associated with Trump's moves that may lead to recession.
Early Warning Signs
Economists say the clearest signs of recession often show up in overlooked places. These lagging indicators suggest that while prices may remain high, the real economy is already slowing down beneath the surface.
One thing to watch is freight volumes — less cargo coming in and high prices on the shelf could indicate front-loaded inflation with more negative economic impacts to come.
Another early warning sign is an uptick in business credit usage. Smaller businesses that run out of liquidity to cover their expenses sometimes turn to credit just to cover their operating costs. If they can't catch up, this lack of liquidity can lead to job cuts.
Be Aware: 4 Mistakes the Upper Middle Class Are Making With Their Money in the Trump Economy
Escalating Tariffs Strain Stability
President Trump's aggressive stance on tariffs led to a 0.3% contraction in the U.S. economy during the first quarter of 2025, marking the first decline in three years.
'The tariffs are upending the global trading system and current manufacturing chains that have generated tremendous prosperity for the U.S. and helped promote widespread affordability until the recent inflation surge,' said Wayne Winegarden, an economist at the Pacific Research Institute. 'The interruption to this trading system will diminish the long-term growth potential of the U.S.'
Erratic Decisions Erode Confidence
Trump's unpredictable shifts in economic policy and sudden reversals on imposing sweeping tariffs have created an uncertain climate for businesses and investors.
'While there are issues and imbalances in the global system that need to be addressed, the problem with the current administration's policies is an inherent inconsistency among the different objectives they seemingly want to achieve,' said Davide Accomazzo, a finance instructor at Pepperdine University's Graziadio Business School.
Accomazzo continued, 'Trying to lower inflation is inconsistent with high tariffs, and a lower dollar is inconsistent with the need to stabilize the bond market and guide interest rates lower.'
Escalating Global Tensions
Trump's imposition of tariffs up to 145% on Chinese imports has triggered a retaliatory response from Beijing, including 125% tariffs on U.S. goods and restrictions on critical mineral exports.
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