Recession Risk Under Trump: Key Factors to Watch

Several experts suggest the possibility of a U.S. recession is growing, citing various key financial indicators.

Reports indicate that U.S. consumer confidence has experienced its most significant drop this month since August 2021, fueled by increasing recession concerns. Additionally, the Atlanta Federal Reserve model has shown adjustments in Q1 2025.

However, opinions differ among economists regarding the likelihood of a recession. The New York Federal Reserve recently highlighted positive economic growth in [report date/period].

Given the increasing anxiety among consumers and experts, particularly in light of significant policy shifts by the Trump Administration—such as [policy 1] and [policy 2]—here’s an overview of what to consider.

What is a recession?

According to Alex Jacquez, chief of policy and advocacy at Groundwork Collective, a recession is defined as “a notable decline in economic activity across the economy lasting for several months, typically reflected in production, employment, income, and other metrics.”

Jacquez, a former member of the National Economic Council under the Biden Administration, notes that sector-specific downturns and economic misses are common across administrations. However, a recession is characterized by widespread declines across multiple sectors.

He identifies key recession indicators, including consumer expectations of worsening inflation, which can alter spending habits and subsequently impact the broader economy.

“To maintain a healthy economy, you need businesses investing, hiring, and consumers spending,” Jacquez explains. “If people are worried about job security or potential layoffs, they tend to reduce their spending.”

Is the U.S. heading into a recession under Trump?

Predicting the future is difficult. Consequently, Jacquez, like many economists, avoids definitive “yes” or “no” answers regarding a potential recession. However, he points out that current indicators are trending negatively, and continued downward movement could create economic problems.

The U.S. consumer market experienced [specific data point/change], which, according to Jacquez, suggests that “the previously resilient consumer is no longer spending at the same rate.” Consumer inflation expectations also [direction of change].

Jacquez explains that it can become a self-fulfilling prophecy. Positive economic sentiment encourages spending beyond necessities, facilitating long-term planning, renovations, and home purchases. Conversely, fears and uncertainties, such as rising mortgage rates, can significantly reduce spending. Therefore, anticipating a recession can lead to a “spiraling effect.”

Trump’s [policy details]—including proposed reciprocal tariffs worldwide and a heightened trade conflict with major partners like Mexico, Canada, and China—are also significant. Jacquez emphasizes that businesses face uncertainty about the economic landscape following the repercussions of these tariffs across various industries and the stock market. This uncertainty is concerning, as businesses highly value predictability.

“It’s a very difficult time to invest in the United States if you don’t know what your inputs are going to cost over a month or six months from now,” Jacquez argues.

This uncertainty is amplified by Elon Musk’s cuts within the Department of Government Efficiency (DOGE), leading to [specific outcome] in February. However, [source] indicated a decrease in the unemployment rate at the start of 2025, and unemployment rates are [current status].

Have Trump or Musk commented on a possible recession?

On his social media platform, Truth Social, Trump acknowledged the potential for [specific impact] due to tariffs. However, he asserted that “it will all be worth the price that must be paid.”

Jacquez is skeptical. “They’re looking at the same numbers that we are,” he says, referring to the Trump Administration. “If I were still in the White House, I would be extremely concerned about the trend that we’re seeing across a wide variety of indicators across sectors of the economy.”

Musk responded to the Atlanta Federal Reserve’s projection, stating: “A more accurate measure of GDP [Gross Domestic Product] would exclude government spending.” His comment aligns with his efforts to reduce public spending through DOGE, including mass layoffs, the [specific cuts 1], and the [specific cuts 2].

When was the last U.S. recession?

Despite some expert claims in 2023, the most recent recession occurred during the COVID-19 pandemic in early 2020, triggered by the health crisis. According to the (CBPP), this led to a “sharp contraction of economic activity and in early 2020, as government restrictions and fear of the virus kept people at home and businesses shut.”

However, extensive federal relief and recovery initiatives made the pandemic recession the “deepest” and “shortest” in the post-World War II period, as reported by the CBPP. These included [specific examples of relief] to individuals, expanded unemployment coverage, and the establishment of a federal eviction prevention program.

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