MW Economists start to predict that dire economic slowdown has already begun
By Greg Robb
Trump's tariffs amount to the largest one-day tax hike in history
As the impact of President Donald Trump's across-the-board tariffs on almost all U.S. trading partners starts to emerge, economists are starting to predict a dramatic economic slowdown this year.
Carl Weinberg, chief U.S. economist at High Frequency Economics, thinks the downturn has already begun, with economic growth in the January-March quarter expected to be down to about a 2% annual rate.
Weinberg sees the economy falling out of bed in the second quarter to a negative 4.5% rate, with further contraction in the final six months of the year.
"The economy is headed for a sharp downturn. Layoffs will surge," Weinberg said, calling the tariff plan "the Trump Job Destruction Order."
Among economists, the impact of tariffs is well known: Prices will jump and spending will decline. Ultimately, the tariffs are a tax that will be paid out of household incomes and corporate profits. The Trump tariff plan "is the largest one-day tax hike in history," Weinberg said.
The White House last week set a minimum tariff of 10% on most imported goods that began on April 5. Higher country-specific tariffs are set to go into effect on Wednesday.
Michael Feroli, chief U.S. economist at J.P. Morgan, forecast that the U.S. economy will slip in to recession starting in June, with the weakest months coming in the middle of the year. The recession won't start earlier than that, he said, because the expected drag on investment spending will take some time to materialize.
Alec Phillips, an economist at Goldman Sachs, raised his 12-month recession probability to 45% from 35% a week ago. In normal times, recession odds are around 15%.
At the same time, Phillips lowered his 2025 GDP forecast to a 0.5% rate for the year, down from 1% previously.
"The combination of larger tariffs, greater policy uncertainty, declining business and consumer confidence, and messaging from the administration indicating greater willingness to tolerate near-term economic weakness in pursuit of its policies increase downside risk," Phillips said.
-Greg Robb
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April 07, 2025 10:39 ET (14:39 GMT)
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