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Home » News » Is the U.S. Heading Into a Recession Under Trump?

Is the U.S. Heading Into a Recession Under Trump?

By REBECCA SCHNEID

March 9, 2025
in News, US
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Various experts, utilizing several key financial indicators, are stating that the odds of a recession in the United States may be getting higher.

According to Bloomberg, U.S. consumer confidence has dropped this month the most since August 2021, with recession fears on the rise. The Atlanta Federal Reserve model has also suggested that economic growth might be negative in Q1 2025.

Yet, there’s some disagreement across the economic spectrum as to whether a recession is being indicated. The New York Federal Reserve recently pointed to healthy economic growth in Q1 of 2025.

With consumers and experts alike concerned about a recession, particularly amid mass changes being made by the Trump Administration—such as proposed reciprocal tariffs and mass layoffs—here’s what you need to know.

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What is a recession?
A recession can be defined as a “significant decline in economic activity spread across the economy lasting more than a few months, normally visible in production, employment, income, and other indicators,” says Alex Jacquez, chief of policy and advocacy at the economic think tank Groundwork Collective.

Jacquez used to work at the National Economic Council under the Biden Administration, and says that it is normal for there to be downturns of certain sectors during each Administration—as well as certain misses on the economic side—but the real indicators of recession are when these downturns run across sectors.

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He points to specific indicators of a recession, including whether consumers are expecting inflation to be worse in the future, which impacts people’s spending habits, then “spills over” into the real economy.

“What you need to keep an economy chugging is businesses investing, businesses hiring, and people spending money,” Jacquez says. “If people are apprehensive about whether their jobs are going to go away or whether there are going to be more layoffs in the future, you’re gonna start to see a pullback on spending.”

Prediction can be a tricky game. As such, Jacquez, like many economists, prefers to stay away from the binary answer of “yes” or “no” when it comes to whether a recession is coming. But he says the current indicators are trending downwards, and if they continue in that direction, it will spell trouble for the economy.

The U.S. consumer market saw a sharp decline last month for the first time in over two years, which Jacquez says is starting “to indicate that the resilient consumer is no longer spending at the pace that they used to be.” Consumer inflation expectations also soared in February.

It’s a self-fulfilling prophecy, says Jacquez. When people are feeling good about the economy, it pushes them to spend and stimulate buying beyond just the essentials, to make long-term plans, to renovate and buy a home. If people are fearful and unsure about things such as whether or not mortgage prices will rise, they will not spend as much. Thus, the expectations of a recession can potentially have a “spiraling effect.”

Trump’s tariffs—including proposed reciprocal tariffs worldwide and a more intense trade war against America’s three biggest trading partners in Mexico, Canada, and China—are also a pivotal factor. Businesses are uncertain, Jacquez says, about what the economy is going to look like after the fallout of these tariffs ripple down different industries and the stock market. This can be unsettling, as what businesses “crave most” is certainty.

“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 bolstered by the cuts that Elon Musk has made with the Department of Government Efficiency (DOGE)—cuts that spearheaded a major spike in layoffs in February. Yet, according to data reported by the U.S. Bureau of Labor Statistics in January, the unemployment rate went down in the beginning of 2025, and unemployment rates are a key indicator of recession.

Have Trump or Musk commented on a possible recession?
Trump acknowledged on his social media platform, Truth Social, that there may be “some pain” felt due to the tariffs. Ultimately, though, he said it “will all be worth the price that must be paid.”

Jacquez has his doubts.“They’re looking at the same numbers that we are,” he says of 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 has responded to the Atlanta Federal Reserve’s concerning projection, stating on X: “A more accurate measure of GDP [Gross Domestic Product] would exclude government spending.” His comment comes as he makes efforts to slash public spending through DOGE, including mass layoffs, the defunding of federal research agencies and USAID, and the end of thousands of government contracts.

When was the last U.S. recession?
Though certain experts predicted that the U.S. would slip into a recession in 2023, the last recession was actually during the COVID-19 pandemic in early 2020—triggered by the health crisis. This caused a “sharp contraction of economic activity and huge job losses in early 2020, as government restrictions and fear of the virus kept people at home and businesses shut,” according to the Center Budget and Policy Priorities (CBPP).

Yet, the federal government enacted many relief and recovery measures, which made the pandemic recession the “deepest” and the “shortest” recession in the post-World War II era, according to the CBPP. These recovery efforts included cash payments to individuals, expanding unemployment coverage, and establishing a federal eviction prevention program.

Source: TIME.
Tags: AmericaeconomyRecession
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