Some people in the United States fear Donald Trump‘s economic agenda could see the economy fall into recession, with experts giving mixed predictions for the year ahead.
Newsweek has contacted Trump’s transition team for comment via email.
Why It Matters
Despite inflation being at its lowest level in three years, more jobs being added to the market and the economy expanding in 2024, many Americans remain concerned about the issues, with polls showing that the economy was one of the most important issues to voters during the election.
What To Know
Some people are concerned that Trump’s economic agenda could see the economy fall into recession. Last month, the incoming president threatened to slap an additional 10 percent tariff on all Chinese exports to the U.S. and a 25 percent tariff on Canada and Mexico.
Canada and Mexico are major trading partners with the U.S., accounting for almost 30 percent of U.S. trade volume. It remains uncertain whether Trump will follow through on his tariff proposals or whether they are part of a broader negotiating strategy as he prepares to return to office in January, but if the tariffs are imposed, they could cost Americans an estimated $78 billion annually, NBC News reported, with everyday goods costing more.
Meanwhile, the president-elect’s pledges to cut business taxes and regulations have investors hoping for a surge in the American stock market, but there are fears his measures would open up a gaping hole in the federal budget, which could hurt the economy.
Trump has also pledged to hold the largest mass deportation in history and has said he will use the National Guard to round up migrants and invoke the Alien Enemies Act, a 1798 law that allows the president to deport any noncitizen from a country the U.S. is at war with.
The American Immigration Council estimated that deporting 1 million people annually until the undocumented population is eliminated could result in a 4.2% to 6.8% reduction in GDP. “To put this in context, the economy shrank by 4.3 percent during the Great Recession,” the Democrats noted.
A recession occurs when a country’s economic activity declines significantly and lasts for more than a few months.
What People Are Saying
Jan Hatzius, head of Goldman Sachs Research and the firm’s chief economist, said in a press release: “The fundamental upward pressure on the unemployment rate may have ended via a combination of stronger labor demand growth and weaker labor supply growth (because of slowing immigration). This brings the job market signal back into line with the broader growth data.”
Bill Stone, chief investment officer of Glenview Trust Company told CNBC: “The market is, to my view, at least everything I look at, is setting very low odds of recession next year, and it’s not that I have any sort of a forecast for recession, I’m just saying it’s priced for a very low probability. That would make for some fairly ugly markets, I think, if suddently we got those probabilities moving up. I don’t necessarily foresee that.”
Paul Mortimer-Lee, a research fellow at the National Institute of Economic and Social Research, told The Telegraph the U.S. economy could slump if the president-elect follows through with “ill-considered, rushed and damaging” plans for tariffs, mass deportation, tax cuts and slashing government spending.
He said the package would be “likely to tip the U.S. economy into recession,” adding that a “worst-case scenario” could see the U.S.’ GDP contract by between 2 and 3 percentage points.
“Expelling 5 million workers could reduce GDP by close to 2.5 per cent,” Mortimer-Lee said. “Since expulsions would continue for years, the reduced rate of growth in GDP would be persistent—not a one-off shock like tariffs.”
What Happens Next
Economists will continue to monitor growth in the economy to predict a recession, keeping a close eye on whether Trump acts on many of his campaign pledges.
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