(WASHINGTON) — U.S. stocks seesawed between gains and losses on Monday in the lead up to a promised fresh round of President Donald Trump’s tariffs on April 2, which he has dubbed “liberation day.”
The market rollercoaster came a day after Goldman Sachs raised its odds of a recession within the next year from 20% to 35%, citing the tariffs. The move marked the latest in an upsurge of recession fears on Wall Street in recent weeks.
A policy of wide-ranging levies on foreign goods could tip the U.S. into a recession, experts said. They pointed to risks of a slowdown for businesses mired in higher tax costs, as well as a shopping slump as consumers curtail spending to pad their savings to help weather price increases and a possible economic downturn.
The degree and duration of Trump’s forthcoming tariffs remains unknown, experts added, but they pointed to such uncertainty as another reason the economy could fall into a recession.
“If both businesses and consumers start to worry and pull back their spending, that is what can tip the U.S. over into a recession,” Kara Reynolds, an economist at American University, told ABC News.
Mark Zandi, chief economist at Moody’s Analytics, described potential tariffs on April 2 as “the fodder for an economic downturn.”
Trump has already announced a flurry of duties, including sector-specific tariffs targeting autos, steel and aluminum. The U.S. has also imposed levies on some goods from Mexico, Canada and China.
Over the weekend, Trump told reporters that the next round of tariffs could affect “all the countries.”
“The tariffs will be far more generous than those countries were to us, meaning they will be kinder than those countries were to the United States of America,” he said.
The Trump administration has largely declined to rule out the possibility of a recession. Speaking at the White House earlier this month, Trump said a “little disturbance” may prove necessary to rejuvenate domestic production and reestablish well-paying manufacturing jobs.
Experts generally define a recession by the shorthand metric of two consecutive quarters of decline in a nation’s inflation-adjusted gross domestic product, or GDP.
Tariffs could threaten economic growth and employment since duties slapped on imports risk increasing costs for businesses that rely on raw materials from abroad, some experts told ABC News.
Experts widely expect importers to pass along a share of the tariff burden to consumers in the form of higher prices, which could make the firms less competitive as they may struggle to retain customers who suffer sticker shock.
If business performance suffers, firms will likely freeze or reduce investment, threatening economic growth.
“As business investment goes down, that can trigger a recession,” Anne Villamil, a professor of economics at the University of Iowa, told ABC News.
Even the looming risk of tariffs can make shoppers uneasy, potentially sinking the economy further, experts said.
Consumer spending accounts for about two-thirds of U.S. economic activity. In March, consumer confidence dropped to its lowest level since 2021, according to a survey conducted by The Conference Board.
As consumer attitudes sour, shoppers could encounter tariff-induced price increases, leaving buyers even more frustrated.
“It’s already showing up in consumer confidence,” Jeffrey Frankel, a professor of capital formation and growth at Harvard University. “There is chaos and uncertainty around the tariff policy.”
By some key measures, however, the economy remains in solid shape. Hiring stands at robust levels alongside a historically low unemployment rate. Inflation sits well below a peak attained in 2022, though price increases register nearly a percentage point higher than the Fed’s goal of 2%.
Villamil, of the University of Iowa, acknowledged the strength of the economy in recent months. Still, she added, tariffs could plunge the U.S. into a downturn.
“The concern is that all of this policy uncertainty is putting the economy at risk,” Villamil said.
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