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CNN
7 days ago
- Business
- CNN
The jobs report that enraged Trump was flashing a recession warning sign
The bad news in last Friday's jobs report may have been overshadowed when President Donald Trump fired the commissioner in charge of producing it. But economists haven't forgotten about America's job market – and they're growing concerned. Some of the jobs report data has economists using a word they haven't uttered in several months: recession. Hiring over the past three months slowed dramatically, creating problems for the economists and statisticians at the Bureau of Labor Statistics whose job is to make sense of the payroll data they get from thousands of businesses across the country. As new data came in about May and June's employment, the BLS was forced to sharply lower those months' job totals from their preliminary estimates. The BLS revised May and June's jobs totals lower by a combined 258,000 jobs. That massive revision gave economists some serious agita. Larger revisions have happened before, but every time changes that large have taken place over the course of at least two months, the US economy has been in a recession – at least since records began in 1968. 'The job market is terrible,' said Douglas Holtz-Eakin, former director of the Congressional Budget Office during the George W. Bush administration. 'Outside of education and health, the economy has lost private sector jobs in the past three months. That's terrible.' The US economy has added an average of just 85,000 jobs per month this year, which is well below the 177,000 jobs that the economy added on average each month before the pandemic. Poor jobs data doesn't mean the US economy is in or going into a recession. Several recent economic indicators are pointing in the wrong direction – weakness in second-quarter gross domestic product and slower-than-expected growth in both the manufacturing and services sectors, for example. But, importantly, the National Bureau of Economic Research, which is responsible for declaring recessions, tracks four big indicators of economic activity – consumer spending, personal income, factory production and employment. None have been pointing to a recession or even that the US economy is on the precipice of a recession. That is, until Friday's jobs report. Yet even the recession alarms it sounded come with some caveats. Recent moribund job growth was likely distorted by business uncertainty surrounding Trump's tariffs, and it's too early to tell whether it will rebound or continue to remain at this low level, noted Keith Lerner, co-chief investment officer at Truist. 'The US economy is in a muddle-through environment,' said Lerner, who said the Federal Reserve probably needs to take action to lower interest rates soon because the jobs report suggests it might be behind the curve. The Fed has known about the slowing hiring for quite some time. But the sharp pullback over the past few months – data the Fed didn't have when it made its decision last week to hold interest rates steady – probably means the economy is considerably weaker than economists had expected. 'Friday's jobs report was terrible with recessionary level numbers, but slowing hiring is not new,' said Robert Ruggirello, chief investment officer, Brave Eagle Wealth Management. 'While Friday's report does not mean we are entering a recession, it shows that companies are freezing hiring and firing until there is more policy certainty and business confidence.' Ironically, the leading culprit for slowing jobs growth may be the thing that has been holding the Fed back from cutting rates: Trump's tariffs. The Fed had been in wait-in-see mode in case tariffs pushed prices higher. The flip side is that the US economy appeared strong enough to handle higher interest rates. But it seems businesses are no longer waiting. They're freezing hiring and changing their investments as they grow fearful that tariffs could raise costs and hurt the economy. 'The president's unorthodox economic agenda and policies may be starting to make a dent in the labor market,' said Chris Rupkey, chief economist at FwdBonds. 'Businesses are not waiting as they are cutting back on the numbers of new workers they bring on board, which means we can no longer count on the employment markets to be a positive factor supporting economic growth in the weeks and months ahead.' Trump's immigration policy appears to be taking a toll, too. Since April, 1.4 million people dropped out of the US labor force – 802,000 of whom were foreign born. That may have helped make the jobs report look slightly better than it actually is. Because of the way the survey was taken, if the 503,000 who dropped out of the labor force but still wanted to work had told the BLS that they were actively searching for a job, the unemployment rate would have risen to 4.5% last month, Rupkey said. Instead, it rose to 4.2%. The revisions, though surprising for their sheer size, were not fully unexpected. They align with the other inputs that analysts have been tracking, Goldman Sachs economists said in a note to clients Saturday, and they help paint a clearer picture of the economy. Other key jobs indicators 'have slowed significantly in recent months,' wrote Goldman Sachs economist Jan Hatzius. 'Taken together, the economic data confirm our view that the US economy is growing at a below-potential pace.' In other words, Goldman Sachs isn't shocked by the revisions. If anything, they fit with the broader puzzle pieces. The revisions were 'undeniably concerning,' Bank of America economists said in a note to investors Monday. But the 'silver lining' is that a considerable amount of the revisions had to do with seasonal adjustments – basically algorithms that needed adjusting as new data came in. The BLS considers its initial jobs numbers to be preliminary when they're first published, because some respondents fail to report their payroll data by the BLS' deadline. Low survey responses can make the report more challenging to estimate. But the BLS continues to collect the payroll data as it's reported, and it revises the data accordingly. To extrapolate the data for the entire country, BLS economists add in some educated guesswork, based on seasonal hiring trends. The BLS also smooths out the data with calculations known as seasonal adjustments to avoid huge spikes and dips in data each month. The data are also revised because of those seasonal adjustments. If the more complete data comes in well above or below the preliminary data, revisions can be exacerbated by the BLS' seasonal adjustments, which sometimes need to be recalculated. Now that the BLS has a better sense of the job market – one with a much slower pace of hiring – revisions in future months may be far less dramatic than over the past several. CNN's Matt Egan contributed to this report.
CNN
05-08-2025
- Business
- CNN
The jobs report that enraged Trump was flashing a recession warning sign
Job market Donald TrumpFacebookTweetLink Follow The bad news in last Friday's jobs report may have been overshadowed when President Donald Trump fired the commissioner in charge of producing it. But economists haven't forgotten about America's job market – and they're growing concerned. Some of the jobs report data has economists using a word they haven't uttered in several months: recession. Hiring over the past three months slowed dramatically, creating problems for the economists and statisticians at the Bureau of Labor Statistics whose job is to make sense of the payroll data they get from thousands of businesses across the country. As new data came in about May and June's employment, the BLS was forced to sharply lower those months' job totals from their preliminary estimates. The BLS revised May and June's jobs totals lower by a combined 258,000 jobs. That massive revision gave economists some serious agita. Larger revisions have happened before, but every time changes that large have taken place over the course of at least two months, the US economy has been in a recession – at least since records began in 1968. 'The job market is terrible,' said Douglas Holtz-Eakin, former director of the Congressional Budget Office during the George W. Bush administration. 'Outside of education and health, the economy has lost private sector jobs in the past three months. That's terrible.' The US economy has added an average of just 85,000 jobs per month this year, which is well below the 177,000 jobs that the economy added on average each month before the pandemic. Poor jobs data doesn't mean the US economy is in or going into a recession. Several recent economic indicators are pointing in the wrong direction – weakness in second-quarter gross domestic product and slower-than-expected growth in both the manufacturing and services sectors, for example. But, importantly, the National Bureau of Economic Research, which is responsible for declaring recessions, tracks four big indicators of economic activity – consumer spending, personal income, factory production and employment. None have been pointing to a recession or even that the US economy is on the precipice of a recession. That is, until Friday's jobs report. Yet even the recession alarms it sounded come with some caveats. Recent moribund job growth was likely distorted by business uncertainty surrounding Trump's tariffs, and it's too early to tell whether it will rebound or continue to remain at this low level, noted Keith Lerner, co-chief investment officer at Truist. 'The US economy is in a muddle-through environment,' said Lerner, who said the Federal Reserve probably needs to take action to lower interest rates soon because the jobs report suggests it might be behind the curve. The Fed has known about the slowing hiring for quite some time. But the sharp pullback over the past few months – data the Fed didn't have when it made its decision last week to hold interest rates steady – probably means the economy is considerably weaker than economists had expected. 'Friday's jobs report was terrible with recessionary level numbers, but slowing hiring is not new,' said Robert Ruggirello, chief investment officer, Brave Eagle Wealth Management. 'While Friday's report does not mean we are entering a recession, it shows that companies are freezing hiring and firing until there is more policy certainty and business confidence.' Ironically, the leading culprit for slowing jobs growth may be the thing that has been holding the Fed back from cutting rates: Trump's tariffs. The Fed had been in wait-in-see mode in case tariffs pushed prices higher. The flip side is that the US economy appeared strong enough to handle higher interest rates. But it seems businesses are no longer waiting. They're freezing hiring and changing their investments as they grow fearful that tariffs could raise costs and hurt the economy. 'The president's unorthodox economic agenda and policies may be starting to make a dent in the labor market,' said Chris Rupkey, chief economist at FwdBonds. 'Businesses are not waiting as they are cutting back on the numbers of new workers they bring on board, which means we can no longer count on the employment markets to be a positive factor supporting economic growth in the weeks and months ahead.' Trump's immigration policy appears to be taking a toll, too. Since April, 1.4 million people dropped out of the US labor force – 802,000 of whom were foreign born. That may have helped make the jobs report look slightly better than it actually is. Because of the way the survey was taken, if the 503,000 who dropped out of the labor force but still wanted to work had told the BLS that they were actively searching for a job, the unemployment rate would have risen to 4.5% last month, Rupkey said. Instead, it rose to 4.2%. The revisions, though surprising for their sheer size, were not fully unexpected. They align with the other inputs that analysts have been tracking, Goldman Sachs economists said in a note to clients Saturday, and they help paint a clearer picture of the economy. Other key jobs indicators 'have slowed significantly in recent months,' wrote Goldman Sachs economist Jan Hatzius. 'Taken together, the economic data confirm our view that the US economy is growing at a below-potential pace.' In other words, Goldman Sachs isn't shocked by the revisions. If anything, they fit with the broader puzzle pieces. The revisions were 'undeniably concerning,' Bank of America economists said in a note to investors Monday. But the 'silver lining' is that a considerable amount of the revisions had to do with seasonal adjustments – basically algorithms that needed adjusting as new data came in. The BLS considers its initial jobs numbers to be preliminary when they're first published, because some respondents fail to report their payroll data by the BLS' deadline. Low survey responses can make the report more challenging to estimate. But the BLS continues to collect the payroll data as it's reported, and it revises the data accordingly. To extrapolate the data for the entire country, BLS economists add in some educated guesswork, based on seasonal hiring trends. The BLS also smooths out the data with calculations known as seasonal adjustments to avoid huge spikes and dips in data each month. The data are also revised because of those seasonal adjustments. If the more complete data comes in well above or below the preliminary data, revisions can be exacerbated by the BLS' seasonal adjustments, which sometimes need to be recalculated. Now that the BLS has a better sense of the job market – one with a much slower pace of hiring – revisions in future months may be far less dramatic than over the past several. CNN's Matt Egan contributed to this report.
CNN
05-08-2025
- Business
- CNN
The jobs report that enraged Trump was flashing a recession warning sign
The bad news in last Friday's jobs report may have been overshadowed when President Donald Trump fired the commissioner in charge of producing it. But economists haven't forgotten about America's job market – and they're growing concerned. Some of the jobs report data has economists using a word they haven't uttered in several months: recession. Hiring over the past three months slowed dramatically, creating problems for the economists and statisticians at the Bureau of Labor Statistics whose job is to make sense of the payroll data they get from thousands of businesses across the country. As new data came in about May and June's employment, the BLS was forced to sharply lower those months' job totals from their preliminary estimates. The BLS revised May and June's jobs totals lower by a combined 258,000 jobs. That massive revision gave economists some serious agita. Larger revisions have happened before, but every time changes that large have taken place over the course of at least two months, the US economy has been in a recession – at least since records began in 1968. 'The job market is terrible,' said Douglas Holtz-Eakin, former director of the Congressional Budget Office during the George W. Bush administration. 'Outside of education and health, the economy has lost private sector jobs in the past three months. That's terrible.' The US economy has added an average of just 85,000 jobs per month this year, which is well below the 177,000 jobs that the economy added on average each month before the pandemic. Poor jobs data doesn't mean the US economy is in or going into a recession. Several recent economic indicators are pointing in the wrong direction – weakness in second-quarter gross domestic product and slower-than-expected growth in both the manufacturing and services sectors, for example. But, importantly, the National Bureau of Economic Research, which is responsible for declaring recessions, tracks four big indicators of economic activity – consumer spending, personal income, factory production and employment. None have been pointing to a recession or even that the US economy is on the precipice of a recession. That is, until Friday's jobs report. Yet even the recession alarms it sounded come with some caveats. Recent moribund job growth was likely distorted by business uncertainty surrounding Trump's tariffs, and it's too early to tell whether it will rebound or continue to remain at this low level, noted Keith Lerner, co-chief investment officer at Truist. 'The US economy is in a muddle-through environment,' said Lerner, who said the Federal Reserve probably needs to take action to lower interest rates soon because the jobs report suggests it might be behind the curve. The Fed has known about the slowing hiring for quite some time. But the sharp pullback over the past few months – data the Fed didn't have when it made its decision last week to hold interest rates steady – probably means the economy is considerably weaker than economists had expected. 'Friday's jobs report was terrible with recessionary level numbers, but slowing hiring is not new,' said Robert Ruggirello, chief investment officer, Brave Eagle Wealth Management. 'While Friday's report does not mean we are entering a recession, it shows that companies are freezing hiring and firing until there is more policy certainty and business confidence.' Ironically, the leading culprit for slowing jobs growth may be the thing that has been holding the Fed back from cutting rates: Trump's tariffs. The Fed had been in wait-in-see mode in case tariffs pushed prices higher. The flip side is that the US economy appeared strong enough to handle higher interest rates. But it seems businesses are no longer waiting. They're freezing hiring and changing their investments as they grow fearful that tariffs could raise costs and hurt the economy. 'The president's unorthodox economic agenda and policies may be starting to make a dent in the labor market,' said Chris Rupkey, chief economist at FwdBonds. 'Businesses are not waiting as they are cutting back on the numbers of new workers they bring on board, which means we can no longer count on the employment markets to be a positive factor supporting economic growth in the weeks and months ahead.' Trump's immigration policy appears to be taking a toll, too. Since April, 1.4 million people dropped out of the US labor force – 802,000 of whom were foreign born. That may have helped make the jobs report look slightly better than it actually is. Because of the way the survey was taken, if the 503,000 who dropped out of the labor force but still wanted to work had told the BLS that they were actively searching for a job, the unemployment rate would have risen to 4.5% last month, Rupkey said. Instead, it rose to 4.2%. The revisions, though surprising for their sheer size, were not fully unexpected. They align with the other inputs that analysts have been tracking, Goldman Sachs economists said in a note to clients Saturday, and they help paint a clearer picture of the economy. Other key jobs indicators 'have slowed significantly in recent months,' wrote Goldman Sachs economist Jan Hatzius. 'Taken together, the economic data confirm our view that the US economy is growing at a below-potential pace.' In other words, Goldman Sachs isn't shocked by the revisions. If anything, they fit with the broader puzzle pieces. The revisions were 'undeniably concerning,' Bank of America economists said in a note to investors Monday. But the 'silver lining' is that a considerable amount of the revisions had to do with seasonal adjustments – basically algorithms that needed adjusting as new data came in. The BLS considers its initial jobs numbers to be preliminary when they're first published, because some respondents fail to report their payroll data by the BLS' deadline. Low survey responses can make the report more challenging to estimate. But the BLS continues to collect the payroll data as it's reported, and it revises the data accordingly. To extrapolate the data for the entire country, BLS economists add in some educated guesswork, based on seasonal hiring trends. The BLS also smooths out the data with calculations known as seasonal adjustments to avoid huge spikes and dips in data each month. The data are also revised because of those seasonal adjustments. If the more complete data comes in well above or below the preliminary data, revisions can be exacerbated by the BLS' seasonal adjustments, which sometimes need to be recalculated. Now that the BLS has a better sense of the job market – one with a much slower pace of hiring – revisions in future months may be far less dramatic than over the past several. CNN's Matt Egan contributed to this report.
CNN
08-07-2025
- Business
- CNN
Inflation is tame. Markets are at record highs. But economists warn Trump is still playing with fire on tariffs
US stocks have rocketed back to all-time highs. The unemployment rate remains historically low. And the inflation rate is lower than when President Donald Trump took office. These developments could embolden the White House to play hardball on trade, taking a tougher stance in negotiations with other nations and threatening sky-high tariff rates. But those positive milestones might have a negative side effect: lulling Trump officials into believing the economy is safe from harm fueled by the president's trade war. Many economists and trade experts worry the damage from the trade war has not been canceled; it just hasn't arrived yet. They fear that overdoing tariffs and prolonging the uncertainty will only make matters worse. 'No one should be lulled into complacency,' Douglas Holtz-Eakin, president of center-right think tank American Action Forum, told CNN in a phone interview. 'There is no way you can avoid these price pressures. The tariffs are real. It will show up. The only question is how fast and where. That story has yet to play out.' And it's a moving target because the tariff rates and deadlines are in an almost constant state of change. Under Trump, tariffs have been announced, delayed, dialed back and revived seemingly at random. In the latest twist, Trump unnerved investors on Monday by announcing double-digit tariff rates on Japan, South Korea and a handful of other countries. However, the new tariffs don't kick in until August 1, extending the uncertainty that investors and CEOs despise. The market reaction Monday may have been more negative if not for Trump's history of walking back his most extreme proposals. Wall Street traders have even coined a phrase for this pattern, calling it the TACO trade, short for Trump Always Chickens Out. Therein lies the challenge: It's incredibly difficult to measure the tariffs' impact, given the extensive lags between when they're announced and when they actually hit the US economy. It can take weeks or months for tariffs to filter through the system, going from manufacturers to wholesalers to retailers and ultimately American consumers. Stores knew tariffs were coming, so many tried to beat the clock by importing inventory before tariffs kicked in. That means many items on store shelves this spring and early summer were still priced at those low pre-tariff levels. In a reflection of that trend, the consumer price index (CPI) rose 2.4% in May, down from 3% in January when Trump took office. But eventually that pre-tariff inventory will run out, raising the risk that price hikes are still on the way. 'If people think just because we got away with two months and it's all good, that's a mistake,' said Holtz-Eakin, a former economic adviser to President George W. Bush and director of the nonpartisan Congressional Budget Office. As Federal Reserve Chairman Jerome Powell has noted, some goods exposed to tariffs have experienced significant price increases, including appliances, toys, computers and other electronics. Yet those price hikes have been masked by price drops elsewhere, including on gasoline. 'It looks like all the numbers are coming in their favor, but you can't just put all this price pressure into the system and expect it will disappear. It can't,' said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. David Kelly, chief global strategist at JPMorgan Asset Management, agreed that tariffs will eventually feed through — even though they haven't yet in a big way. 'We should be careful. Complacency could come from delayed reaction. That's the danger of delayed reactions,' Kelly said. The JPMorgan executive compared it to a toddler who falls on the pavement and doesn't immediately start crying. It doesn't necessarily mean injury was avoided; the reaction may just be delayed. 'The economy is OK, but it's losing some momentum here. And I think the tariff uncertainty is very real,' Kelly said. Of course, it's almost impossible to forecast precisely how this will play out. There is no playbook for how a modern economy reacts to on-again, off-again tariffs at the scale Trump has proposed. The matter is complicated by the 2022 inflation crisis — the worst in 40 years — and the psychological scars from that episode. Investors, small business owners and consumers are more sensitive to price hikes than during Trump's first term. Wall Street cranked up the pressure on the White House after those April 2 tariffs shocked many, coming in higher than even the worst-case scenarios. After bond and stock markets freaked out by pricing in an imminent global recession, Trump blinked. He paused the tariffs for 90 days to allow time to negotiate. That delay set the stage for an epic market recovery, with US stocks recouping all of their steep losses in lightning speed. In the eyes of investors, tariffs went from a clear-and-present danger to merely background noise. 'My feeling is the administration will feel somewhat empowered to play hardball because the stock market is at an all-time high,' said Keith Lerner, co-chief investment officer and chief market strategist at Truist Wealth. US markets finished at record highs on Thursday after the Bureau of Labor Statistics reported the economy added a better-than-expected 147,000 jobs in June. The unemployment rate unexpectedly ticked down to 4.1%. However, beneath the surface of that June jobs report, there were some concerning signals about the state of the labor market. For instance, job growth was concentrated in a limited number of sectors, not widespread as jobseekers and economists would prefer. And the unemployment rate fell in part because the number of jobseekers fell, a trend that Morgan Stanley said reflects a 'chilling effect' from the Trump administration's immigration crackdown. 'I worry more about a recession and unemployment rising than inflation,' said Kristina Hooper, chief market strategist at Man Group, the world's largest listed hedge fund. Hooper said that while tariff-driven inflation is on the way, it will likely be short-lived. On the other hand, policy uncertainty linked to trade can depress business investment in the medium term. 'There seems to be something of a perfect storm pressuring many households,' Hooper said, referring to price increases and student loan payments resuming. That's why Hooper urged the Trump administration to get trade deals done 'quickly' to give businesses clarity on the rules of the road. 'In that kind of environment,' Hooper said, 'all you need is a modest increase in unemployment to tip an economy into much slower growth – and potentially a recessionary environment.'
CNN
12-05-2025
- Business
- CNN
Trump's China trade breakthrough might be enough to avoid self-inflicted recession
President Donald Trump marched the US economy to the brink of a self-inflicted recession and a potential supply chain meltdown. But at the last moment, Trump decided to pull back. The US-China breakthrough unveiled Monday calls for a 90-day thaw in the trade war by slashing tariffs from suffocatingly high levels as trade was paralyzed between the world's two biggest economies. The dramatic drop in US-China tariffs is an undeniable positive compared to just a few days ago. The breakthrough has already set off an epic party on Wall Street and is raising hopes that a tariff-driven nightmare can be avoided. Yet economists say it's still too early to declare the US economy is out of danger altogether. Recession risks remain, even if the odds of a downturn have been dialed back a notch. Tariffs are still very high — much higher than at any point in decades. Uncertainty is even higher. Damage to confidence and trade flows won't be undone overnight. Moreover, there is no playbook for what happens next. There is no precedent for how a modern economy responds after going through this many shocks in this short a time. 'We are far from out of the woods,' said Douglas Holtz-Eakin, president of the American Action Forum and a former economic adviser to Republicans. 'There is a narrative that Trump did a U-turn. He didn't. We still have tariffs at levels we haven't seen in a century. That's a substantial tax increase.' At 145%, US tariffs on China were unsustainably high, amounting to an effective embargo on trade. Supply chain experts warned of imminent trouble, including empty store shelves. 'This staves off the really disastrous consequences that were about to hit the US economy,' Erica York, vice president of federal tax policy at the Tax Foundation, told CNN. York added that Trump's economic team backtracking from the 145% tariff rates 'shows the administration realizes what a disaster it would have been.' Even though Trump has repeatedly offered a dose of tough medicine in recent weeks, including questioning how many dolls kids need to own, he has been sensitive to the image of barren store shelves as well as financial market reaction to a deepening trade war, a senior administration official told CNN's Jeff Zeleny. 'Both sides luckily decided to save Christmas,' Peter Boockvar, chief investment officer at Bleakley Financial Group, wrote in a report on Monday. 'The US side listened to the existential crisis of many small businesses.' Still, despite Trump's decision to slash tariffs on China to 30% for at least 90 days, import taxes remain sharply higher than at the start of the year. Based on the trade framework agreements reached with China and the UK, Moody's Analytics calculates the US effective tariff rate has dropped from 21.3% to 13.7%. That's still the highest level since 1910. At that level, tariffs are set to add more than one percentage point to US inflation through this time next year and erase the same amount from gross domestic product (GDP), Mark Zandi, chief economist at Moody's Analytics, told CNN. As a result of the US-China trade war thaw, Zandi is cutting his recession forecast — but not dramatically. He now sees a 45% chance of a US recession this year, down from a peak of 60%. 'The economy will have a tough year but should avoid a recession,' Zandi said in an email. 'Of course, the economy will be highly vulnerable to anything else that might go wrong.' In other words, the trade war has eroded the margin for error in this economy. Justin Wolfers, an economics professor at the University of Michigan, noted on X that it's true that US trade policy and the prospects for the economy are 'much better today than they were yesterday.' But it's also true, Wolfers said, to say that the situation is 'much worse today than on Inauguration Day.' Such is the speed and turbulence of the Trump 2.0 agenda. After Trump spiked tariffs at his April 2 'Liberation Day' event, Wolfers warned the odds of a recession would reach 75% if all the tariffs kicked in and stayed in place. Now Wolfers tells CNN that the risk of a recession has fallen sharply but still remains a coin-flip at roughly 50/50. 'There has been a wholly unnecessary supply chain disruption. You can't undo that. It will take some time to work itself out,' Wolfers said in a phone interview. Nationwide chief economist Kathy Bostjancic now sees the US economy eking out slightly positive growth this year, up from her prior call for no growth at all. Nationwide still sees inflation accelerating to 3.4% this year, but that's an improvement from 4% before the US-China breakthrough. Trump himself acknowledged on Monday that tariffs could still slingshot higher on China. Asked if tariffs would go back to 145% if no deal is reached at the end of the 90 days, Trump said: 'No, but they'd go substantially higher.' He added: 'I think you will have a deal, however.' In other words, the US-China trade war is not over, even if it got dramatically less bad. And tariffs are not being suddenly removed from the president's tool chest. Sector-specific tariffs still loom, including potentially on lumber, semiconductors, pharmaceuticals, copper, critical minerals and trucks. Just last week the Commerce Department set the stage for potential aerospace tariffs by launching a national security probe into imports of airplanes, jet engines and parts. The risk of further tariffs ahead is one reason RSM chief economist Joe Brusuelas is sticking to his forecast of a 55% chance of a recession over the next 12 months. 'While the agreement prevented an economic decoupling, and that is significant, there are still too many details to be determined, especially those sector tariffs, to remove a recession risk from the table,' Brusuelas said. Deutsche Bank economists expressed relief on Monday about the easing trade war. 'The global growth outlook is improving,' Deutsche Bank economists wrote in a report. 'American trade policy has turned more conciliatory and there is now a better defined range of tariff outcomes. The peak of the trade war uncertainty is in.' Of course, uncertainty had almost nowhere to go but down. Trade policy uncertainty, as measured by an index that mentions the topic in major US newspapers, had skyrocketed in recent months to off-the-chart levels unseen since tracking began in the 1960s. The sudden reduction in US and China tariffs will ease financial pressure on the business community but only adds to the sense of whiplash. And it remains to be seen exactly how businesses will respond to levels of uncertainty that Wolfers described as 'paralyzingly high.' 'It's absolutely a manufactured crisis,' said Holtz-Eakin, who served as an economic adviser to Sen. John McCain during the 2008 presidential campaign. Wolfers said investors and the business world are still bracing for the next shoe to drop when it comes to tariff policy out of the Trump White House. 'What are the chances that we have 90 days of calm ahead of us?' Wolfers said. 'Today we have good news, but what would really be good news is if someone just took the button away from him.'
