Nobel Prize-winning economist Paul Krugman warned that President Donald Trump’s unpredictable tariff policies are making a U.S. recession seem likely. Speaking on a Goldman Sachs podcast, Krugman emphasized that it’s not the existence of tariffs themselves but the extreme uncertainty around them imposing, pausing, and changing them rapidly that is depressing business investment and consumer confidence. Markets have already seen significant shifting, with Wall Street experiencing its worst days since 2020 before briefly rebounding after Trump paused some tariffs.
Krugman’s concerns are echoed by other financial leaders like Ray Dalio of Bridgewater Associates and economist Torsten Slok, who both warned that continued tariff volatility could easily push the country into a recession or worse. Dalio even compared the current environment to the 1930s, noting the dangers of mishandled trade wars and growing global tensions, particularly with China. Despite these warnings, Trump and his allies have defended the tariffs as part of a broader strategy to strengthen American manufacturing and encourage economic self reliance.
For now, Trump has issued a 90-day pause on a range of retaliatory tariffs, and negotiations with multiple countries are ongoing. However, tariffs on China remain, and the overall business climate remains shaky. Krugman noted that while he doesn’t expect a severe recession immediately, a sharp drop in consumer spending could quickly turn the situation worse, underlining the fragile state of the economy as the uncertainty continues.
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https://www.newsweek.com/us-recession-seems-likely-nobel-winning-economist-says-2064347
The uncertainty created by the administration's back and forth stance on tariffs has ha a significant impact on business and consumer confidence. While the 90 day pause helps to somewhat ease uncertainty, the administration better get things under control soon. Otherwise we will start to see a significant drop in investment from businesses, which could lead to the recession that everyone is afraid of.
ReplyDeleteI think it’s fascinating how it’s not the existence of the tariffs themselves but, instead, it is the volatility around them of people not knowing what the administration will do next since they are constantly messing around with the tariffs. I am very interested to see what the future will bring in regards to this topic.
ReplyDeleteIt will be interesting to see how the economy will react if tariffs are implemented. with uncertainty high, right now is probably a preview of full tariff implementation.
ReplyDeleteKrugman’s point about businesses holding back on investment because they don’t know what’s coming next makes a lot of sense. It’s concerning how even a pause in tariffs isn't enough to calm things down, and comparing it to the 1930s shows how serious it could get if things don’t stabilize soon.
ReplyDeleteI wonder how this kind of uncertainty affects smaller businesses differently than large corporations. Big firms might have the resources to adapt, but small businesses could really struggle to plan ahead when the rules keep shifting.
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