Trump declines to rule out recession

Donald Trump has refused to rule out a US recession this year, saying that his sweeping economic agenda could cause short-term turbulence.

US President Donald Trump pumps his fist after stepping off Air Force One at Palm Beach International Airport in West Palm Beach, Florida. Picture: AFP

President Donald Trump has refused to rule out a US recession this year, saying that his sweeping economic agenda could cause short-term turbulence that he ­believed would drive future prosperity.

Asked on Fox News on Sunday (Monday AEDT) if he was expecting a recession, Mr Trump replied: “I hate to predict things like that. There is a period of transition because what we’re doing is very big.”

Mr Trump has moved to overhaul the US economy in an agenda focusing on new tariffs, limiting immigration and cutting regulations, government jobs and taxes. He is also looking for spending cuts in several federal programs.

While many businesses have cheered his broader agenda, the uncertainty over tariffs slapped on close trading partners Mexico and Canada has rattled markets. He has proposed and pulled back tariffs multiple times in just the past few months.

The President’s moves are testing the resilience of the American economy, which has had robust growth and low unemployment. There are some early signs of strain, with a drop in consumer spending and fears about inflation weighing on businesses.

The stockmarket rallied in late 2024, fuelled by investor enthusiasm about his agenda. But it has sputtered in recent weeks. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite Index on Friday all closed at lower levels than where they were when Mr Trump was inaugurated on January 20.

In a sign of the stop-start implementation of his trade agenda, the Trump administration last week paused 25 per cent tariffs on most cars and parts that flow across the borders from Mexico and Canada less than 48 hours after they took effect.

On Sunday, the President demurred when asked if there were reassurances he could provide to businesses seeking more clarity on tariffs. “Well, I think so,” he said. He then added: “You know, the tariffs could go up as time goes by.”

The President, who regularly bragged about the stockmarket’s performance in his first term, played down its importance to his second-term agenda.

“Look, what I have to do is build a strong country. You can’t really watch the stockmarket. If you look at China, they have a 100-year perspective,” he said.

Treasury Secretary Scott Bessent last week also said that the US economy could be in for a rough patch during this economic transition.

“The market and the economy have just become hooked,” Mr Bessent told CNBC. “We’ve become addicted to this government spending, and there’s going to be a detox period.”

Mr Trump has in recent days acknowledged the choppiness tariffs have brought.

“There could be some disturbance, a little bit of disturbance,” he said on Friday. In his Tuesday speech to congress, he defended his agenda while also noting there could be some disruptions.

The US continued to generate jobs at a steady pace in February, according to data released last week. But economists see signs that employment could weaken in coming months because of government layoffs, reduced government funding, the continuing uncertainty over tariffs and immigration restrictions.

A sharply divided congress also faces a Friday deadline to approve more funding to avoid a ­government shutdown, adding another wrinkle to the country’s economic outlook.

The Wall Street Journal