A key economic adviser to President Donald Trump on Monday pushed back on talk of recession stemming from uncertainty around his administration’s tariff policies, even as a survey of American households showed consumers growing more pessimistic about their prospects, and U.S. stocks plunged.
In an interview with CNBC, Kevin Hassett, who heads the National Economic Council, said there were many reasons to be optimistic about the U.S. economy, despite some predictions of a contraction in gross domestic product in the first quarter and concerns about inflation.
Trump’s tariffs on Canada, China and Mexico were already having the intended effect of bringing manufacturing and jobs back to the United States, he said.
“There are a lot of reasons to be extremely bullish about the economy going forward. But for sure, this quarter, there are some blips in the data,” Hassett said, saying those stemmed from both timing effects of Trump’s rapid-fire tariffs push and some of what he called the “Biden inheritance.”
Trump and his team have repeatedly bashed the economy that they inherited from Democrat Joe Biden. But when Trump took office in January, GDP growth had largely exceeded trend for two years, consumer spending was strong and unemployment was still near historic lows.
Several recent indicators, though, have pointed to a softening trend, and the New York Fed’s monthly Survey of Consumer Expectations out on Monday concluded: “Households expressed more pessimism about their year-ahead financial situations in February, while unemployment, delinquency, and credit access expectations deteriorated notably.”
The percentage of households expecting the jobless rate to be higher a year from now rose to its highest since September 2023.
Meanwhile, the Atlanta Federal Reserve’s closely followed GDPNow tracker suggests the economy could contract in the first three months of the year, largely due to an outsized drag from net trade.
Hassett said that would be a “very temporary phenomenon,” driven largely by a historical tendency to hold off on investment after a big election. This tendency should be resolved this month, and tariff uncertainty should be resolved in April, he said.
Trump himself in a Fox News interview aired over the weekend declined to predict whether his economic policies – centered so far on a blitz of tariff announcements, some of which have taken effect and others delayed or set to kick in later – would cause a recession.
U.S. stock markets, already in retreat amid concern about his erratic decision-making on tariffs that most economists see as slowing activity and stoking inflation, on Monday were suffering their largest drop since Trump took office. The S&P 500, which hit a record high in mid-February, was down 2.7% and Nasdaq was off by 4%. Both were at their lowest since September.
“Trump was seen as the market’s savior, promising lower taxes and less stringent regulation. Now, his actions represent the harbinger of doom,” said Dan Coatsworth, investment analyst at AJ Bell in London. “The ‘R’ word is back on everyone’s lips as people ponder if trade tariffs will backfire and lead to recession rather than U.S. economic prosperity.”
Reuters polls of economists last week showed risks to the Mexican, Canadian and American economies are piling up amid a chaotic implementation of U.S. tariffs that has created deep uncertainties for businesses and decision-makers. The surveys showed 70 of 74 economists polled across Canada, the U.S. and Mexico judged that the risk of a recession had increased, and upside risks to inflation in the U.S. rose in particular.
Economists at Goldman Sachs have cut their 2025 U.S. growth forecast and raised their inflation forecast, “both on the back of more adverse tariff assumptions.” They said their growth estimate was now below the consensus figure for the first time in two-and-a-half years.
Trump has imposed an additional 20% tariff on Chinese goods entering the United States, as well as 25% tariffs on imports from Canada and Mexico, although he suspended most of the duties on U.S. neighbors until April 2, when he plans to unveil a global regime of reciprocal tariffs on all trading partners.
Hassett struck an upbeat note, arguing U.S. tax cuts would boost the economy, increase investment and boost real wages by the second quarter, offsetting any negative fallout from the tariffs.
“Just be very wary … of conversations about recession,” he said. “What I think that what’s going to happen is the first quarter is going to squeak into the positive category, and then the second quarter is going to take off as everybody sees the reality of the tax cuts,” he said.
Austin Ramirez, president and CEO of hydraulic equipment maker Husco, based in Waukesha, Wisconsin, was among those who welcomed Trump’s campaign pledges to push through tax and regulatory reforms.
Those things are good for his business, Ramirez said, while tariffs and the threat of tariffs are negative for his business.
“Now,” he said, “the worry is that it’s all the bad stuff happening, and none of the good stuff.”
