Recession Becoming More Likely

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 

IMF: Tariffs by the U.S. put Global Growth, Stability at Risk

The International Monetary Fund (IMF) has dramatically reduced its global growth projection for 2025 to 2.8%, warning that President Trump's tough tariff policy is tightening up economies around the world. According to the IMF, the U.S. will only grow 1.8% this year—a whole point less than in 2024—while inflation will reach 5% by September.

The administration's blanket 10% tariff on all imports, with additional higher rates on specific countries, is raising consumer prices, distorting supply chains, and creating uncertainty that discourages investment. Firms are unwilling to invest or hire, and global trade flows are weakening.

IMF officials have called on the U.S. to complete trade deals quickly to soothe tensions and revive economic confidence. Absent relief, the tariffs risk triggering protracted stagnation in key world markets and hurting recovery momentum worldwide.

Increased Prices, Decreased Spending

• Tariffs raise import costs, fueling inflation. When prices are higher, consumers spend less, reducing demand and slowing GDP growth.

Business Uncertainty

• Uncertain trade policy discourages investment and hiring. Companies delay expansion, reducing productivity and hiring growth.

Export Burdens

• Retaliation against U.S. exports, especially manufacturing and agriculture, shrinks crucial economic segments.

Interest Rates and Inflation

• Accelerating inflation may lead the Fed to keep interest rates high, increasing borrowing costs and further downgrading growth.

Global Ripple Effects

• When America slows, the rest of the world slows along with it. Damage to supply chains, foreign markets, and investor confidence increases the possibility of recession everywhere.

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Donald Trump Hopes to Become a One-Man Deregulator

            In his second term, President Donald Trump is pushing for deregulation. aiming to take apart federal regulations quickly. This effort has gained support from both Trump loyalists and traditional conservatives. They are brought together by a desire to reduce the administrative state's power. However, Trump's approach involves bypassing established conditions and procedures to speed up the dismantling of regulations, which raises concerns about the potential diminishment of checks and balances.

To achieve his goals of deregulation, Trump is using executive authority / power and appointing officials who align with his vision of less government intervention. This strategy includes replacing institution leaders with individuals who share the same goals and visions as Trump. While this approach may speed up policy changes, it also risks interfering with the stability and predictability that regulations put in place. Despite the efforts, Trump's deregulation push faces significant resistance, making this approach more difficult. Legal obstacles are likely due to the fact that the administration's methods and goals violate procedural requirements and mandates.

https://www.economist.com/united-states/2025/04/24/donald-trump-hopes-to-become-a-one-man-deregulator

IMF Cuts US Economic Growth Forecast Over Trade Tensions, Policy Uncertainty

    Earlier today (April 22, 2025), the International Monetary Fund (IMF) lowered its growth outlook for the U.S. and several other countries, citing rising trade tensions and weakening global demand. Back in January, the IMF expected the U.S. economy to grow 2.7% this year, but that number has now been cut sharply to 1.8%. The 2026 forecast was also trimmed, down to 1.7% from 2.1%. According to the IMF, this downgrade is largely due to “greater policy uncertainty, trade tensions, and softer demand momentum.
    Since the start of the year, the U.S. has introduced a wave of new tariffs, with other countries responding. The resulting trade barriers are now at levels not seen in a century, surpassing even the infamous 1930 Smoot-Hawley tariffs, which many economists believe deepened the Great Depression. These trade disruptions are sending shockwaves through the economy, dampening investor confidence and casting doubt on future growth.
    The IMF also scaled back its global outlook. It now expects worldwide growth to hit 2.8% in 2025 and 3% in 2026, both lower than its January forecast of 3.3%. In Europe, growth is expected to slow to 0.8%, while emerging markets are projected to expand by just 3.7% in 2025 and 3.9% in 2026. Some of the steepest downgrades were seen in countries most impacted by tariffs. China, for example, saw its growth forecast cut to 4% for both years, a notable drop from earlier projections.

    IMF chief economist Pierre-Olivier Gourinchas told reporters that while a U.S. recession isn’t in the base case, the risk is climbing. The IMF now sees about a 37% chance of a downturn, up from 25% earlier this year. Truth be told, no one is sure of the future.

IMF Cuts US Economic Growth Forecast Over Trade Tensions, Policy Uncertainty

IMF Warns of Global Slowdown as Trump Tariffs Trigger Economic Shock

On April 22, 2025, the International Monetary Fund (IMF) warned that President Trump's newly imposed tariffs have become a major negative shock to the global economy. In response to rising trade tensions, the IMF cut its global growth forecast for 2025 from 3.3% to 2.8%, citing reduced investment, weakened trade, and increased inflation across several major economies.

Tariffs Fuel Economic Instability

The U.S. is expected to see its GDP growth fall to 1.8%, down from the earlier projection of 2.7%, with inflation now forecasted at 3%. The IMF attributes nearly half of this slowdown to the economic impact of new tariffs, which have disrupted supply chains and raised costs for businesses and consumers. Other major economies are also feeling the effects. The UK's growth projection was reduced to 1.1%, the lowest in the G7, while China's is forecasted at 4%, below its target. Mexico is expected to enter a mild recession. The global consequences of U.S. trade policy are raising fears of long-term economic fragmentation.

Investor Confidence Wavers

As inflation rises and growth slows, investor confidence has taken a hit. The IMF noted increased volatility and a sharp repricing of risks in global markets, reflecting broader concerns about financial stability. Industries dependent on international trade and infrastructure, particularly manufacturing and energy, may face the harshest headwinds.

Looking Ahead: Uncertainty or Cooperation?

UK Chancellor Rachel Reeves has traveled to Washington to seek exemptions and promote more open trade dialogue. The IMF urges global leaders to work toward stability and cooperation, warning that failure could deepen the slowdown and prolong financial strain. The path forward remains unclear. With tariffs reshaping trade relationships and pressuring growth, policymakers' next moves will be critical in determining whether this movement becomes a temporary disruption or the start of a broader downturn.

Article: IMF Warns of 'major negative shock' from Trump's tariffs By Heather Stewart

Source: https://www.theguardian.com/business/2025/apr/22/imf-major-negative-shock-trump-tariffs-uk