"Tariffs Not the Issue: Recession Fears Linger Amid Trump Uncertainty"

# Trump Eases Aggressive Economic Policies Amidst Trade War Uncertainty Donald Trump, the U.S. President, appears to be scaling back his assertive economic measures, sparking hope that the trade tensions between the U.S. and China might ease. However, concerns over an economic slowdown persist, fueled by the unpredictable nature of Trump’s policymaking. On May 23 (local time), Trump signaled that if progress in negotiations with China remains stagnant, he would unilaterally impose new tariffs on Chinese imports within two to three weeks. The day prior, he had suggested that the existing 145% tariff level could decrease significantly if negotiations were successful, effectively using a mix of pressure and incentives to bring China to the negotiation table. Trump remarked, “If we don’t reach a deal, we will just set a figure,” only to specify a concrete timeline for tariff implementation a day later—a further demonstration of his unpredictable approach. # Backtracking on Fed Criticism In recent months, Trump has been vocal in criticizing Federal Reserve Chair Jerome Powell for his cautious approach to interest rate cuts amidst inflationary pressures from tariff policies and fears of an economic slowdown. Trump had even floated the idea of firing Powell as part of his growing pressure on the central bank. According to reports from The Washington Post, Trump allegedly considered removing Powell on multiple occasions over the past few months. Yet on May 22, he abruptly dismissed the speculation, stating the firing rumors were overblown media discourse and claiming he harbored no intention of dismissing Powell. By May 23, Trump resumed his criticism of the Fed chairman but refrained from mentioning dismissal, signaling a slight retreat from extreme stances. # Market Responds Favorably, but Experts Remain Skeptical Financial markets have welcomed Trump’s moderation. Following sharp gains on May 22, U.S. stock indices posted another strong rally on May 23. However, experts question whether this shift could translate into long-term stability in the markets. The erratic nature of Trump’s policy reversals, they argue, continues to fuel uncertainty, amplifying fears of a broader economic downturn. Wendy Edelberg, senior fellow at the Brookings Institution, told CNN, “This is just more turbulence. The uncertainty created by the White House is far more dangerous than the tariffs themselves.” While equity markets surged over two consecutive days, they have yet to recover losses incurred during Trump’s presidency. Since January, U.S. stocks have declined 11%. Data from FactSet reveals that the S&P 500 index has shed more than $7 trillion in market capitalization since its peak two months ago. Experts estimate the risk of a recession this year to range between 50% and 70%, with some warning that Trump’s flip-flopping on trade tariffs exacerbates the chances. Kent Smetters, a professor of business economics and public policy at the University of Pennsylvania’s Wharton School, cautioned that even if tariffs are immediately rolled back, the mere uncertainty stemming from such erratic economic policies could shave at least 1% off U.S. GDP. He further noted that if all proposed tariffs are fully implemented, GDP could drop by as much as 5%. # Corporate Sentiment and Consumer Impact The wavering confidence of businesses under Trump’s administration suggests a longer road to recovery. In its Beige Book released the same day, the Federal Reserve underscored the pervasive uncertainty around international trade policies. The report observed, “Uncertainty over trade policy is widely disseminated,” adding that some companies have begun implementing additional tariffs or shortening pricing periods in response to the ambiguity. It projected that most firms are likely to pass the added costs onto consumers. Edelberg reiterated the challenges businesses face in maintaining operational stability. “Firms are struggling to find direction. They’re all holding their breath because they don’t know what policy will become law tomorrow,” she remarked. Despite the temporary boost to the stock market, the long-term outlook remains clouded by unpredictability, leaving both companies and investors wary of what lies ahead.