The market capitalization of the U.S. stock market disappeared by $4 trillion (approximately 5,832 trillion won) on the 10th (local time) compared to last month's peak. The concern that the U.S. economy could fall into recession due to President Donald Trump's imposition of tariffs or threat of tariffs against China, the European Union (EU), Canada, and Mexico has hit the stock market hard. Furthermore, Trump did not rule out the possibility of recession in an interview broadcast by Fox News on the 9th, amplifying the market's anxiety.
In an interview with Fox News broadcast on the 9th, Trump responded to the question, "Do you expect a recession this year?" by saying, "I do not want to predict such a thing," but added, "What we are doing is very significant, so there is a transition period." He continued, "What we are doing is a huge task of bringing wealth back to America, and this takes a little time."
When Trump used the term "transition period" in response to the question about the possibility of a recession, the market interpreted it as Trump potentially accepting a recession to accomplish what he believes is significant. Earlier, Trump's mention of China while encouraging a long-term perspective also bolstered this interpretation.
In response to the question, "Did you postpone the tariffs due to the market reaction?" he stated, "I do not even look at the stock market," and added, "What I need to do is build a strong nation." He also mentioned, "China has a 100-year perspective. But we move in quarters," and asserted, "Thanks to what is happening now, America will become a very strong country."
Of course, Secretary of Commerce Howard Ratner attempted to clarify after Trump's interview broadcast by saying, "The United States will not experience a recession," but the U.S. stock market plummeted, and market anxiety persists. The Washington Post noted, "Regardless of the potential benefits of a long-term approach, Trump must contend with potential backlash from Americans that could damage his and the Republican Party's future."
◇ Fluctuating Trump tariff policy increases recession predictions
The fear of recession had been growing even before Trump's comments about not denying a recession. This is due to the increased uncertainty as the Trump administration has broadly altered economic policies, including imposing tariffs.
According to the Bureau of Labor Statistics, the unemployment rate in February rose slightly to 4.1% from the previous month (4%), and the number of additional jobs (151,000) was lower than market expectations (160,000). Additionally, consumer confidence, a good indicator of consumer spending, a significant part of U.S. economic growth, fell the most in three and a half years in February. The Consumer Confidence Index released by the Conference Board on the 25th of last month dropped 7 points to 98.3, marking a decline for three consecutive months. This is the largest drop since August 2021.
This is due to the rising concerns about price increases as Trump imposed or threatened tariffs on Canada's, Mexico's, and China's three major trading partners. Trump has threatened to impose tariffs, claiming that Canada and Mexico increased illegal immigration and the influx of fentanyl, and the tariffs are set to take effect on April 2.
The market is raising the possibility of a recession. J.P. Morgan has increased the risk of recession in the U.S. this year from 30% at the start of the year to 40%. J.P. Morgan said, "There is a substantial risk that the U.S. could fall into recession this year due to extreme American policies." Goldman Sachs also announced on the 9th that they have raised the odds of a recession within the next year from 15% to 20%. Goldman Sachs warned that if the administration is "committed to the policies even in the face of much worse data," the forecasts could increase. Morgan Stanley lowered its U.S. growth rate forecast for this year from 1.9% to 1.5% on the 7th. The core Personal Consumption Expenditures (PCE) price index, which is preferred by the Federal Reserve, is expected to rise by 2.7% this year, which is 0.2 percentage points (P) higher than the previous forecast.
◇ Unfazed Chair Powell says, “U.S. economy is still good”
Although the risk of recession has increased since Trump's inauguration, there are evaluations that the U.S. economy is not in a situation to immediately fall into recession. Above all, Jerome Powell, Chair of the Federal Reserve, does not feel anxious about the state of the U.S. economy.
At an event hosted by the University of Chicago on the 7th, Powell stated, "Despite the heightened level of uncertainty, the U.S. economy is still maintaining a good state," and added that the U.S. economy has continued to see robust growth. He also remarked on the recent negative economic indicators, saying, "We do not need to rush, and we are in a good situation to wait until clearer results emerge."
Additionally, Powell stated, "It is not just the issues caused by tariffs that we need to examine; we must also consider growth and all other matters arising from the broad changes in economic policy," indicating that he will take a wait-and-see approach for the time being.