Trump: US economy enters transition period, refuses to rule out possibility of recession

Source: Jinshi Data

President Trump refused to rule out the possibility that the U.S. economy will shrink and enter a recession this year, saying his sweeping economic agenda could cause short-term turbulence but he believes it will drive future prosperity.

In an interview with Fox News' "Sunday Morning Futures" program, Trump was asked if he expected a recession this year, and he responded: "I hate predicting things like that. There's a transition period because what we're doing is very big. We're bringing wealth back to the United States, and that's a big deal."

Trump has set out to overhaul the U.S. economy, with an agenda focused on new tariffs, restrictions on immigration, cuts to regulations, government jobs and taxes. He also wants to cut spending on some federal programs. While many businesses have welcomed his broader agenda, uncertainty over tariffs on close trading partners Mexico and Canada has unsettled markets. His tariff statements have been erratic over the past few months.

Trump's moves are testing the resilience of the U.S. economy, which is currently growing strongly and has a low unemployment rate. Some early signs of strain are already showing, with a drop in consumer spending and concerns about inflation weighing on businesses.

U.S. stocks, which rallied in late 2024 on investor enthusiasm for Trump’s agenda, have lost steam in recent weeks. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all closed Friday below where they were when Trump took office on Jan. 20. U.S. stocks have fallen more than 6% since peaking on Feb. 19. Investors have faced seven straight days of moves in the S&P 500 of at least 1% during trading hours and sharp declines in tech stocks such as Nvidia and Tesla.

The Trump administration last week suspended a 25% tariff on most cars and parts crossing the border from Mexico and Canada, a sign of the stop-start nature of his trade agenda.

In the interview, which aired Sunday, Trump said no when asked if he could offer reassurances to businesses seeking more clarity on tariffs. "You know, over time, the tariffs are probably going to go up," he said.

Trump, who often touted the stock market's performance during his first term, has downplayed its importance to his second-term agenda.

"Look, what I'm trying to do is build a strong country. You can't really look at the stock market," he said.

U.S. Treasury Secretary Jeff Bessant also said last week that the U.S. economy could have a tough time during this economic transition.

"The market and the economy have become addicted, we've become addicted to government spending, and this is going to be a period of withdrawal," Bessant said on CNBC's "Squawk Box."

Trump has acknowledged the turbulence caused by tariffs in recent days. "There may be some disruptions, a little bit of disruption," he said Friday. In a speech to Congress last Tuesday, Trump defended his agenda while also noting that there may be some disruptions.

Data released last week showed that the U.S. continued to create jobs at a steady pace in February. But economists see signs that employment could weaken in the coming months amid uncertainty over government layoffs, reduced government funding, tariffs and immigration restrictions.

A deeply divided Congress also faces a Friday deadline to approve more funding to avoid a government shutdown, adding new uncertainty to the economic outlook.

Commerce Secretary Lutnick ruled out the possibility of an economic contraction in a televised address on Sunday. "There will be no recession in the United States. The U.S. economy has never been in recession since the pandemic began in 2020," he said on NBC News' "Meet the Press."