Another economist believes the economic turmoil spawned from President Trump’s tariffs will push an already slowing US economy into recession.
“We are going into a recession,” Renaissance Macro head of economics Neil Dutta wrote in a note on Wednesday. “I don’t think it is especially controversial to say so. I suspect it will be relatively brief, but that the recovery off the lows will be pretty sluggish.”
Dutta listed tightening financial conditions, reduced government spending, and further escalation of the trade war as potential headwinds to economic growth. Last week, JPMorgan became the first Wall Street bank to call for a recession in 2025 following Trump’s tariff announcements.
In an interview with Yahoo Finance on Tuesday, Dutta highlighted that the recovery for the economy and the stock market won’t look like the V-shaped snapback seen in 2020.
He likened the slowdown he anticipates to the early 2000s recession, where a slowing economy was met by various exogenous shocks, including 9/11. This results in a “slog” of a recovery, per Dutta.
Dutta was early in calling out that economic data had been slowing prior to Trump taking office. He pointed to specific economic data points, like the employment rate of “prime age” workers ages 25-54 declining half a percentage point in the past six months.
“Go back in history and look at what that implies for recession,” Dutta told Yahoo Finance. “It’s very rare outside of recession.”
Dutta argued that outside of the tariff story, metrics like an unemployment rate hovering at 4% have masked a labor market that’s already deteriorating. The quits and hiring rates were already near decade lows, reflecting a low-churn labor market.
For the final months of 2024, the debate in the economic community had been about how long the labor market could hold on thin ice with slowing hiring and limited turnover. In the end, it appears the impact of Trump’s tariffs could be the final straw that turns the data for the worse.
“[Trump] didn’t have as much of an economic buffer as people think,” Dutta said.
