Recession ‘Absolutely’ Expected If Trump’s Tariffs Persist, Financial Expert Warns
By Gustaf Kilander, Washington, D.C.
April 21, 2025
In a stark warning about the state of the U.S. economy, Torsten Slok, chief economist at Apollo Global Management, declared that a recession will "absolutely" occur if current tariffs remain in place. Slok shared his insights during an appearance on CNBC, pointing to significant economic repercussions stemming from recent tariff policies implemented by former President Donald Trump.
Tariffs Linked to Economic Contraction
Slok emphasized the urgent need for policymakers to reconsider the recently enacted tariffs, which he argued could lead to a two-quarter contraction in economic output, estimating a potential drop in Gross Domestic Product (GDP) by four percentage points. He noted that the odds of a recession occurring this year are alarmingly high, reaching up to 90 percent if the tariffs on imported goods stay at their current levels.
The situation escalated when President Trump, on April 9, instituted a 90-day pause on most tariffs while simultaneously escalating tariffs on Chinese imports to an unprecedented 145 percent. This contradictory approach to tariff policy has introduced volatility into stock markets, amplifying fluctuations in stock prices day-to-day based on traders’ reactions to the news.
Impact on Small Businesses
According to Slok, the consequences of these tariffs are particularly dire for small businesses, which may lack the financial resources to absorb the increased costs associated with higher tariffs. “Large businesses can manage the extra costs, but small businesses do not have the working capital,” Slok explained. He cited scenarios involving independent retailers, such as a toy seller in Nebraska or a ski gear vendor in Colorado, emphasizing their vulnerability.
The forecast is grim: Slok warns that numerous retailers could face bankruptcy if the current tariff levels persist. Such a downturn in the retail market would not only harm individual businesses but could also dampen the labor market, adversely affecting consumer sentiment in the broader economy. Small businesses, which employ nearly 80 percent of the labor force, play a crucial role in overall economic health.
Job Market Implications
The economist shared particular concern regarding weekly jobless claims, highlighting that this metric often signals early weaknesses in the job market. "The impact of tariffs—especially those levied on China—is severely affecting small businesses," he remarked. While the repercussions have not yet visibly manifested in jobless claims, Slok anticipates that the effects will soon become apparent.
Wall Street’s apprehension regarding a potential recession has escalated in recent weeks, driven largely by the unpredictability of Trump’s tariff policies. David Kelly, an analyst at JPMorgan Asset Management, recently suggested there was a 60 percent chance of recession if these tariffs continue.
Conclusion
The data presented by Torsten Slok and other analysts underscores growing concerns about the U.S. economy’s direction in light of ongoing trade policies and their effects on various sectors. As the situation develops, the economic landscape remains fraught with uncertainty, emphasizing the importance for stakeholders and policymakers to monitor these trends closely in order to mitigate potential negative impacts.
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