- Trump’s tariffs sparked recession fears , tilted inflation outlooks higher, sent stocks tumbling, and dimmed consumer sentiment—but his administration claims to be focused on the long-term.
The S&P 500 lost $5 trillion in value in just three weeks after entering correction territory on Thursday due to concerns about President Trump’s tariff threats. But Treasury Secretary Scott Bessent, who was a hedge-fund executive before becoming a politician, is not worried.
“I’m not concerned about a little bit of volatility over three weeks,” Bessent told CNBC Thursday. He’s thinking long-term.
Bessent had previously warned of an economic “detox” — and he doubled down during his Thursday interview, claiming that the economy would always have to transition. When asked if that was a euphemism for a recession, Bessent replied, “Not at all. It does not need to be… Our goal is to ensure a smooth transition.
Nonetheless, Americans are concerned. Consumer sentiment fell 11% this month, according to the most recent sentiment survey from the University of Michigan, which was released on Friday. This is the third consecutive month in which sentiment has declined. Consumer sentiment has dropped 22% since December, the month after Trump was elected.
Even though inflation has cooled more than expected, the finance world remains largely unsold. Some economists believe inflation may rise again once Trump’s tariffs take effect. “The dizzying back-and-forth over tariffs is a large and unpredictable upside risk to the inflation outlook,” Bill Adams, chief economist at Comerica Bank, told Fortune in a statement issued after the data was released on Wednesday.
Investors are concerned that prolonged tariffs will fuel higher inflation while weighing on economic growth, resulting in stagflation, Evercore analysts wrote in a note earlier this month. According to a research note released on Wednesday, JPMorgan economists expect Trump’s tariffs to result in higher inflation and slower economic growth.
Economists argue that tariffs raise inflation because when businesses are forced to pay additional taxes, they tend to pass those costs on to consumers, potentially resulting in decreased economic activity or slower growth.
Other economists and analysts are increasingly concerned that the United States will enter a recession. Trump’s “changing stance on tariffs has sparked anxiety across financial markets for some time,” George Vessey, lead macro strategist at Convera, stated in an analysis earlier this week. “More recently, it has heightened concerns that policy uncertainty could push the U.S. economy into a recession.”
Former Treasury Secretary Larry Summers also predicted a recession. He blamed tariffs, which he referred to as “on-again, off-again,” and predicted a recession of around 50%.
But Bessent isn’t the only Trump administration official dismissing economic concerns while refusing to rule out a recession.
When Vice President JD Vance was asked in a Thursday interview if he could rule out a recession, he said, “You can never predict the future, but I think the fundamentals of the economy are quite strong right now, but we’ll see how this unfolds.” Vance, like Bessent, stated that the administration is focused on the long term.
In an interview on Sunday, Trump did not rule out a recession, but rather predicted a “period of transition”—an omen for what would happen in the coming week. Despite a modest Friday rally, the S&P 500 is down 8.17%, the Dow is down 7.20%, and the tech-heavy Nasdaq is down 11.76% over the last month.
