WASHINGTON (AP) – Stock markets are surged, consumers and businesses are beginning to get sour to the economy, economists are marking estimates of growth this year, with some people increasing the chances of a recession.
The high-tech NASDAQ stock index fell into an amendment last week, defined as a 10% drop from its most recent peak. The wider S&P 500 approached that level on Tuesday.
The stock index is a record high, a sharp shift from a month ago when consumer sentiment was rapidly improving. Many executives were optimistic that President Donald Trump would cut taxes and pursue deregulation.
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Instead, Trump has actively implemented tariffs and tariff threats against the largest US trading partner. On Tuesday, Trump raised the steel import tax from Canada to 50% to 50%, in response to the challenges of Ontario’s obligation to power it sends to the United States.
For now, the economy appears to be stable. Stock prices often fluctuate, and abrupt and temporary declines do not harm the economy. Most analysts believe the chances of a recession are fairly small. Goldman Sachs expects slower growth than last year, but still has a recession chance of just 20%.
Still, fears about the recession are rising as investors, economists and executives realize that Trump’s import taxes are at the forefront of his economic policy than his last term at the White House. Tax cuts and deregulation seem to be on the back burner for now. During Trump’s first term, tax cuts came before import obligations.
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Tariffs can slow the economy in a number of ways. By increasing consumer prices, spending can be slowed down. Companies can pull back investments in new projects when they face higher costs from tariffs. And uncertainty from Trump’s only, unaddressed approach could delay businesses in hiring and investing.
“The longer tariffs stay, the higher the risk of a recession,” says Luke Tilly, chief economist at M&T Bank/Wilmington Trust.
There are a few questions and answers about the recession.
Are there any signs of an imminent recession?
not much. But one development that sparked widespread fear is the real-time economy tracker maintained by the Atlanta branch of the Federal Reserve. Last week, it showed a sharp downshift, and now the US economy is predicting it will shrink at 2.4% per year in the first three months of the year.
Atlanta Fed trackers are technically not forecasts, but rather running tallies that are updated when economic data is released. It has become negative after trade data showed a surge in imports in January.
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Most economists, despite their slow pace, still hope that the US economy will expand in the first quarter. JPMorgan believes growth will slow down from 2.3% in the fourth quarter last year to just 1% annualized in the first quarter.
Still, Harvard economist Larry Summers, former Clinton administration’s Treasury Secretary, put the potential for a recession 50-50 on Monday.
“The emphasis on all of tariffs and ambiguity and uncertainty has led to a chilling demand and rising prices,” Summers posted on X.
Recessions usually occur when the economy crashes into the economy to a shock, such as the 2020 pandemic or the 2007 housing bubble burst. It is not yet clear that tariffs will have a sufficient impact to knock the economy backwards.
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Dan North, a senior economist at Allianz Trade Americas, a financial services company, doesn’t expect a recession, but says that a “complete trade war” that will enable all the tariffs proposed by Trump and trigger retaliation by other countries overseas “constituent shocks.”
What else has caused the stock market to fall?
Trump helped fire sharp market sells on Monday by refusing to eliminate the recession in a Sunday interview with Fox Business News.
When asked if he was expecting a recession this year, Trump said. What we do is so big, there is a transition period. …It will take a little time. ”
But some Trump’s advisors have dismissed concerns about the recession and say the economy should continue to grow.
Why didn’t Trump’s tariffs cause a recession?
The import taxes Trump threatens to impose this time are much cleaned up than the obligations he introduced between 2018 and 2019. This focused mainly on China and several target items such as steel, aluminum and washing machines.
Currently, Trump is 20% liable for all imports from China and threatens to impose a 25% tariff on all imports from Canada and Mexico, the two largest trading partners in the US, and says the US will impose mutual tariffs on all countries involved in US export tariffs, including Europe, India and Japan.
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Jan Hatzius, chief economist at Goldman Sachs, estimates that average US tariffs on imports could result in a 10 percentage point increase.
And most economists say Trump’s 2018-2019 duties caused a recession in the manufacturing sector. The Federal Reserve will tighten the economy by cutting benchmark interest rates three times in 2019.
Other things can also hurt the economy. Elon Musk’s government efficiency, or Doge, is looking to cut down tens of thousands of federal government jobs and sharply cut government spending that can put pressure on the economy. Major commercial aviation said this week that government travel is seeing slower.
Delta Air Lines said Monday that declining consumer and business trust is weakening demand amid widespread economic uncertainty.
What signal suggests that the recession has begun?
The clearest signals are a steady rise in unemployment and a surge in unemployment. Companies generally suspend employment and sometimes fire workers if they think their business is shrinking.
The unemployment rate rose from 4% to 4.1% last month, but it is still very low. However, the employer added 151,000 jobs. This is an indication that businesses are still trying to add workers.
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Many economists monitor the number of people seeking unemployment benefits each week. This is a measure of whether the layoffs are exacerbated. Weekly applications for unemployment aid remain very low by historical standards.
Who will decide when the recession began?
The recession has been officially declared by the ambiguous National Economic Research Bureau, a group of economists whose business cycle dating committees define the recession as “a significant decline in economic activity that spans the entire economy and lasts for more than a few months.”
The committee will take into account employment trends. It also evaluates many other data points, including income, employment, inflation-adjusted expenditures, retail sales, and factory output. It assigns heavy weight to inflation-adjusted income measures that exclude government-supported payments such as Social Security.
However, organizations usually do not declare a recession until one year or sometimes a year later.
