US recession fears grow as tariff policies backfire: Leading economists

As the US continues to pursue aggressive tariff measures, leading American economists and think tanks warn that the very policies meant to bolster economic strength may, in fact, be pushing the country closer to a recession, at a high cost to American households.

According to a study by the Budget Lab at Yale University published April 15, current US tariff policies are expected to cause the average American household to lose $4,900 annually. The report further projects that in 2025, the cumulative impact of all imposed tariffs will slash 1.1 percentage points off the real GDP growth, with a long-term economic contraction of 0.6 percent, equivalent to a $180 billion loss in national output.

The job market is also under pressure. The Yale report predicts that by the end of 2025, US unemployment rate will rise by 0.6 percent, eliminating over 770,000 jobs.

A separate analysis by the Peterson Institute for International Economics echoed these concerns, estimating that US economic growth could stall in 2025, with a 40 percent chance of recession within the next year. It warns that GDP growth in 2025 could slow to just 0.1 percent, while inflation remains stubbornly high, with the personal consumption expenditures (PCE) price index forecasted to rise to 4.0 percent.

Karen Dynan, senior fellow at PIIE and professor at Harvard University, cautioned that the US economy faces significant downside risks. "The US economy will slow sharply this year, as new tariffs and other American policy shifts dampen activity and fuel high global uncertainty," she wrote.

Even Federal Reserve chair Jerome Powell has acknowledged the risks, stating that "the level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth." 

In his speech on Wednesday, he noted that both survey data and market indicators show a noticeable rise in short-term inflation expectations, with many attributing it directly to tariff policies. 

Former US Treasury Secretary Janet Yellen added a stark reminder: "No one knows where these policies are headed. What firm, under these circumstances, with this level of uncertainty, is going to undertake long-term investment?"

Yellen stressed that a decline in both investment and consumer spending could trigger a recession. 

(Cover via VCG)