Will Tariffs Cause a Recession? Probably Not
Right now, the US economy is strong enough to withstand some damage from the president’s trade policy.
Sign of the times.
Photographer: Luke Sharrett/Bloomberg
Given the market turmoil, it appears that the breadth and depth of President Donald Trump’s tariffs surprised all but the most pessimistic of observers. Accounting for yesterday’s surprise 90-day discount to all countries except China — as well as the hike to 125% on China — his proposals are the equivalent of a 23-percentage-point increase in the average US effective tariff rate, to 25%. That’s the highest it’s been since 1909.
Yesterday’s announcement doesn’t change much in terms of the sheer magnitude of these tariffs. If they stay in place beyond 90 days, they will cost the average US household $4,400 in purchasing power this year, according to the nonpartisan Budget Lab at Yale, raising the specter of a recession in 2025. It is certainly reasonable to raise one’s recession probability in light of the last week, especially for anyone who hadn’t penciled in the possibility of high tariffs. But is a recession now more likely than not?