'I hate to predict things' - Trump refuses to rule out US recession as trade war sends shocks through stock market
Donald Trump has refused to rule out the possibility of a recession or higher inflation this year, as his volatile trade tariffs policy sends shockwaves through the US stock market.
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The US president said his country is going through a ‘period of transition’ and that his economic police will ‘take a little time’.
The comments caused the US stock market to take a sharp plunge, with Wall Street’s main indexes the Dow Jones, the S&P 500, and Nasdaq all dropping into the red.
Just last week, the S&P 500 registered its worst week since September, sliding downwards by 3.1%, as a result of Trump’s volatile trade tariffs policy.
Trump has now refused to rule out the possibility of the US economy sliding into a recession and rising inflation as a result of his tariff flip-flopping.
The president responded “I hate to predict things like that,” when asked if he was expecting a recession in an interview with Fox News.
“There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing. And there are always periods of, it takes a little time. It takes a little time, but I think it should be great for us,” Trump said.
When asked if his tariffs could cause a rise in inflation, he said: “You may get it. In the meantime, guess what? Interest rates are down.”
After imposing and then quickly pausing 25% tariffs on imports from Mexico and Canada, markets were sent into a downward spiral over concerns of a trade war.
And when the US hit China with 20% tariffs, the Asian economic giant said they were ‘ready for war’ with the US.
Read more: China says it is ‘ready for war’ with America as Trump tariffs come into effect
In a direct threat to Trump, China’s representatives in America said: “If war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end.”
Less than a month after returning to the White House on January 20, Trump slapped 10% duties on all Chinese imports.
China responded with 15% duties on coal and liquefied natural gas products, and a 10% tariff on crude oil, agricultural machinery and large-engine cars imported from the US.
Despite the uncertainty caused by the tariff policy, the US president said his plans for broader ‘reciprocal’ tariffs will go into effect on April 2, raising them to match what other countries assess - meaning the trade war could be continuing for a while longer.
Last week, the Atlanta Federal Reserve warned of an economic contraction in the first quarter of the year, further fueling the stock market decline.
In his interview on Sunday, Trump seemed to acknowledge that his plans could affect US growth, but would ultimately be "great for us,” he said.
Trump's tariffs have stirred up bad blood among allies who see his aggression on trade as misguided and antagonistic.
The trade war is not necessarily a brief skirmish as the White House maintains that even harsher taxes on imports are coming in April, even as businesses and consumers worry that rising costs will crush economic growth, worsen inflation and result in lay-offs.
Still, the administration is grappling with the fallout of tariffs that could create serious blowback for his political mandate to lower prices.
Trump has acknowledged that his tariffs could cause some financial pain, yet he has repeatedly said the tariffs will lead to more domestic investment and factory work.