Will Trump’s tariffs trigger a recession in US? The signs economists are watching closely

President Donald Trump’s sweeping new tariffs — including a 10% duty on nearly all countries and added taxes on imports from 60 nations — have triggered a financial tremor. The stock market plunged last week, and now economists are asking a bigger question: Could these tariffs tip the US economy into a recession?
The short answer? Not yet. But the country is getting closer.
Goldman Sachs economists just increased the probability of a recession to 45%, from 35% last week. JPMorgan is even more pessimistic, estimating at 60% and cautioning inflation can rise to 4.4% by the end of the year — from the current 2.8%.
“We expect to revise our forecast to a recession” if tariffs remain, wrote Goldman’s Jan Hatzius and colleagues.
So what are the indicators that a recession is in the making? And how will we know if US is already there?
The Fed’s real-time tracker just flashed red
The Atlanta Fed’s GDPNow tool — an online, real-time gauge of economic growth — now estimates a 0.8% decline in first-quarter 2025. That’s a sharp decline from the 2.4% growth registered in late 2024. It’s not an official forecast but one of the most closely followed early indicators.
Global supply chains are getting jammed
Wells Fargo estimates that U.S. tariffs would rise to an average of 23% — a record since 1908. That sort of change “will throw sand in the gears of global supply chains in ways we haven’t seen since the pandemic — and perhaps since World War II,” Wells Fargo economist Shannon Grein said.
Consumer habits are already changing
Apollo’s chief economist, Torsten Slok, is monitoring unusual economic metrics: increased bankruptcies, declining Vegas trips, and subpar movie attendance. Air travel bookings from Canada to the U.S. are expected to drop 70% in the next six months.
Even if tariffs are reversed, Slok cautions that uncertainty alone may lead people to spend less — a recessionary ripple effect.
Businesses are hesitating
Tariffs can be intended to increase U.S. manufacturing, but businesses don’t know how long they will last. That uncertainty might slow factory investments, hiring, and expansion plans.
Job cuts and government austerity may add pressure
The Trump administration is cutting jobs across federal agencies and reducing spending — actions that could further burden the economy, at least in the short term.
So, is US in a recession?
Not officially. Recessions are announced by the National Bureau of Economic Research — a behind-the-scenes group of economists who characterize it as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”
They monitor hiring, spending, factory production, and income. But they usually make the announcement months — even a year — after a recession has started.
What will pledge the beginnings of one?
Look for a steady acceleration of layoffs and a surge in jobless claims. Jobless claims have yet to climb to worrying levels. But if it happens, then watch out because it may become a critical moment of turning around.
Can the Fed interject? Possibly — but it’s complicated
Most economists now anticipate that the Fed will reduce interest rates beginning in June. But since inflation is already high — and tariffs are bound to make it higher — the Fed might need to wait unless there is an unmistakable economic downturn.
“They can’t actually be proactive here because they do have inflation concerns,” said Gennadiy Goldberg of TD Securities.
Fed Chairman Jerome Powell cautioned Friday that tariffs would make inflation worse and indicated the central bank will remain on the sidelines — at least for now.
Trump’s take? This is the cure
“Sometimes you have to take medicine to fix something,” the former president said Sunday. His administration thinks the short-term hurt will be worth it in long-term prosperity.
Whether the economy concurs — or plunges into a outright recession — will be clearer over the coming months.