Policy Indecision & Market Confusion
- Since Donald Trump was re elected in January 2025, his policy decisions have swayed and now create uncertainty.
- Tariffs imposed, withdrawn, or put on hold created confusion in markets.
- It becomes increasingly difficult to predict economic impact with uncertainty regarding breadth, applicability, and time of tariffs.
Rising Tension Surrounding the Imminent Recession
- The August 2025 reading of the New York Federal Reserve’s Recession Probability Gauge is the third highest in decades, rivaling the downturns of the 1970s and 1980s.
- Bond yields signal worry
- Two year US Treasury yields declining: Expectation of economic deceleration, which could lead to Federal Reserve rate cuts.
- Contrast with 2024: In the previous year, the opposite was true increasing yields reflected optimism toward the business policies.
Market Sentiment Transition
- So, were the initial assumptions
- Optimism in light of the 2024 election: Tax cuts first, tariffs later leading to growth and inflation.
- Current events in reality
- No longer confident in Trump’s economic strategy.
- Their sentiments are moving negative mostly based on poor communication from the administration.
Response of Trump to Recession Risks
- Trump, uninterested in what happens in the future downturn, calls it a “period of transition” in economic restructuring.
- Commerce Secretary’s statement
- Must be “detoxing” from over reliance on government expenditure by the US economy.
- Effects of tariffs on the longer term
- More often than not, bad for growth and inflation.
- Benefits potentially short term uncertain.
Global & Industry Effects
- The recession threat of the US affects global economies, including
- The IT sector of India, heavily dependent on the US markets, would have to take the possible slowdown into consideration.
- Second term of Trump
- More aggressive trade policies than in first term.
- Prepared, willing to risk the economy going downhill if it means he gets to put his tariff driven policy into effect.
The rising potential for recession in the US economy increases as Trump’s trade policies continue to usher uncertainty. Markets are adjusting completely to new economic expectations, and businesses must prepare themselves for effects that may take place as far as a downturn goes.
