- 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 only three weeks after entering correction territory on Thursday over concerns surrounding President Trump’s tariff threats. But Treasury Secretary Scott Bessent, who was a hedge-fund chief prior to his political appointment, isn’t worried.
“I’m not concerned about a little bit of volatility over three weeks,” Bessent told CNBC on Thursday. He’s focused on the long-term.
Bessent previously warned of a “detox” for the economy —and he doubled down during his Thursday interview, claiming the economy was always going to have to transition. But when asked if that was a euphemism for a recession, Bessent said: “Not at all. It doesn’t have to be…Our goal is to have a smooth transition.”
Still, Americans are concerned. Consumer sentiment dipped 11% this month, the University of Michigan’s latest sentiment survey released Friday revealed. That marks the third straight month sentiment has declined. Consumer sentiment is down 22% from December, the month after Trump was elected.
The finance world mostly isn’t sold either, even after inflation cooled more than expected. Some economists suspect inflation could rise again once Trump’s tariffs have time to 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 after the data was released on Wednesday.
Investors are worried prolonged tariffs could fuel higher inflation while weighing on economic growth, which would result in stagflation, Evercore analysts wrote in a note earlier this month. JPMorgan economists also see higher inflation and slower growth resulting from Trump’s tariffs, according to a Wednesday research note.
The reason economists argue tariffs push inflation higher is because when companies are forced to pay extra taxes, they tend to pass those higher costs on to consumers, which could result in decreased economic activity, or slower growth.
Other economists and analysts are more worried the U.S. could fall into a recession. Trump’s “changing stance on tariffs has sparked anxiety across financial markets for some time,” George Vessey, lead macro strategist at Convera, said 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 said there was a real possibility of a recession. He blamed what he called on-again, off-again tariffs, and put the odds of a recession near 50%.
But Bessent isn’t the only one in the Trump administration brushing off concerns over the economy, while choosing not to rule out a recession. When Vice President JD Vance was asked in a Thursday interview if he could rule out a recession, he replied: “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, said the administration is focused on the long-haul.
In an interview on Sunday, Trump also did not rule out a recession, but instead said there would be a “period of transition”—an omen for what would come to pass in the week ahead. As of Friday at the time of writing, the S&P 500 is down 8.17%, the Dow is down 7.20%, and the tech-heavy Nasdaq is down 11.76%, all in the past month, despite a modest Friday rally.
