What Donald Trump’s ‘tariff war’ could mean for the US economy
Wall Street is questioning how much pain President Donald Trump is willing for the economy to endure as fears of a recession grow in the United States.
The S&P 500 dropped 2.7%, which is 9% below its all-time high, set just last month, and the Dow Jones Industrial Average dropped 890 points. The NASDAQ also dipped by 4%.
It’s feared that Trump’s so-called ‘tariff war’ could wreak havoc on the US economy, or create enough uncertainty to drive US companies and consumers into a paralysis.
Earlier today, Trump announced a hike on Canadian steel and aluminium imports by an additional 25% – bringing the total to a whopping 50% tariff.
When asked about the potential for a recession by Fox News this weekend, Trump said he ‘hates’ to predict things like that.
‘There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing. It takes a little time,’ he said.
Thomas Sampson, Associate Professor in the Economics at the London School of Economics, told Metro there’s no one indicator which can tell if the economy will enter a recession, but tariff policies are creating uncertainty.
‘The uncertainty that these tariff policies are creating is making businesses unwilling to hire or to invest because they don’t know what the future is going to look,’ he said.
‘Even if Trump does impose these tariffs, they will likely also act as a drag on the economy by increasing prices. If foreign countries retaliate, that’s going to make it harder for US businesses.
‘It’s clear that the impact of all these policies together is negative on the economy. What’s not certain is whether it’s a sufficiently large shock to push the economy into recession or not. But economic growth is being slowed down by these policies.’
During his first term, Trump repeatedly cited stock market gains as evidence that his governmental policies were working – he appears to have backed down on those claims now.
What is a recession?
In simple terms, a recession means there has been a decline in economic activity.
It’s declared when the economy experiences two consecutive quarters of negative GDP – effectively how much the nation is buying and producing.
It’s also linked to increased unemployment figures, stock markets declining, crashing or stagnant wages.
The last recession in the United States was in the early days of the Covid-19 pandemic in 2020 – but the great recession of 2008 and 2009 is the most commonly referenced one.
Mr Sampson said he generally tends to be skeptical that the stock market is a good indicator of the overall health of the economy – but points out there are particular instances where it can be.
‘When we get news about a particular event right – such as announcing new tariffs – if you see an immediate move in the stock market following that announcement, we can be pretty sure that that was caused by the policy announcement,’ he said.
‘The stock market moves around for many reasons, most of which have nothing directly to do with government policy. Implementing or announcing policies that lead to an immediate fall in the market?
‘That’s a pretty clear signal, at least for the firms that are on the stock market, that this policy is likely to reduce profitability,’ he added.
What tariffs is Trump imposing on China, Canada and Mexico?
Trump has implemented:
- 25% additional tariff on imports from Canada and Mexico
- 10% additional tariff on imports from China
- Energy resources from Canada will have a lower 10% tariff
- Earlier today, Trump announced a hike on Canadian steel and aluminium imports by an additional 25% – bringing the total to a whopping 50% tariff.
Even as the US jobs market is still showing stable hiring at the moment,economists are trying to predict how the economy will play out this year and if the US will indeed enter a recession.
Trump’s Commerce Secretary Howard Lutnick said: ‘I would never bet on recession, no chance.’
President Trump’s ‘second-hand’ man, Elon Musk, is also taking a beating as the stock market tumbles – he lost £14 billion yesterday alone.
President Trump has promised to buy a Tesla to support Musk’s ‘baby’ following boycotts and protests against his advisor.
Bloomberg’s Billionaire Index has revealed Musk lost $132 billion (£102 billion) since the beginning of 2025.
Get in touch with our news team by emailing us at webnews@metro.co.uk.
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