The United States is witnessing an unprecedented state of economic uncertainty, as markets are floundering amid volatile economic policies pursued by President Donald Trump, raising questions about the possibility of the US economy entering a recession, according to a report published by The New Yorker.
Although the American economy has maintained stable economic growth in recent years, violent changes in economic and commercial policy, as well as the instability of financial markets and the concern of investors and companies, may lead to a sharp slowdown that may turn into complete recession.
Uncertainty hits everywhere
Economists have always warned that political fog may push consumers and companies to postpone spending and major investments, which leads to slowing economic growth. Economic researcher Nick Bloom, who spent nearly 30 years studying the impact of uncertainty on the economy, indicates that the index of uncertainty in economic policies (EPU) has risen to levels that the United States has not seen since the beginning of the Corona pandemic, but is now higher than the levels registered after the events of September 11, 2001 or the global financial crisis in 2008.
In a statement to “The New Yorker”, Blum said, “There is a lot of evidence that uncertainty slows down the economy. It drives companies to stop investments, and pushes consumers to stop spending.”
He added that some of the most affected sectors may be energy, facilities and heavy industries, as they require long -term investments. “If I plan to build a new factory or a 25 -year -old power plant, sudden changes in definitions and policies make me hesitant. I will wait for the situation to calm down,” he said.
Trump’s commercial policies
Since assuming his post for the second time, Trump has relied on volatile trade policies, imposing customs duties on imports from Mexico and Canada by 25%, before declining after only 48 hours and granted exceptions to auto manufacturers.
Nevertheless, 10% definitions on Canadian oil and gas exports are still ongoing, while the Trump team is planning to launch new “mutual” definitions on April 2, which will be imposed on imports coming from all over the world.
This volatile and constantly changing approach prompted the Wall Street Journal to describe the situation, saying, “Welcome to the trump cycle of Trump’s definitions, as you cannot predict what will happen tomorrow.”
Consumer and corporate confidence declined
A recent report by the Confinness Board Foundation showed that the US consumer confidence index fell sharply in February. While official data about companies’ investments has not yet been issued, the atmosphere in Wall Street began to reflect serious concerns, as Bloomberg stated that some analysts have already started using the term recession.
The Economist Torston behavior, chief economist at Apollo Asset Management Company, warned that uncertainty may cause a “sudden stop” for the economy, as consumers stop buying cars, shopping, and travel, while companies have stopped employment and capital investments.
He added, “The greatest danger is that political uncertainty may lead to a sudden stop for the economy, as consumer spending declines, and companies stop employment and investment.”
Policy chaos threatens growth
Although the markets were optimistic about Trump’s victory in the recent elections, as investors believed that his second term would witness a tax reduction and a cancellation of organizational restrictions, the current reality shows that political instability has become a major factor that affects economic decisions.
Researcher Nick Bloom emphasized that Trump is deliberately this approach, saying, “Most politicians want to be seen as stable, but Trump wants the exact opposite.”
He adds that the capitalist economy needs the ability to predict to work effectively, but since January 20, Trump has been pushing the markets to the edge of the abyss.
Are we on the threshold of stagnation?
While some refuse to confirm the possibility of stagnation, economists see that the current situation does not herald good. One of the biggest challenges is that the impact of the current economic shocks is not yet clear, as there is still ambiguity about the size of the definitions imposed and the extent of their continuation, as well as the effects of federal employees’ demobilization operations.
In this context, the behavior said, “We are still trying to understand the size of the economic shock. The size of government tariffs and hairdos will determine the course of the economy. But how long will these policies continue? No one knows. This makes economic expectations very difficult.”
