Economists breathe sigh of relief over Trump tariff pause, b

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Dow Jones NewsApr 9, 8:38 PM UTC
MW Economists breathe sigh of relief over Trump tariff pause, but recession fears remain elevated

By Greg Robb

 

Goldman now sees no recession as base case, but keeps odds of serious downturn at just under 50%

 

President Donald Trump's 90-day pause on the additional, country-specific "reciprocal" tariffs Wednesday has led to a sign of relief from economists but has not ended worries about a U.S. recession.

 

"While a recession is not off the table, the likelihood has diminished from where it was early this morning before the 90-day pause was announced," said Chris Bragati, chief investment officer at SWBC, an investment firm in San Antonio, in an email.

 

Economists at Goldman Sachs reversed course after Trump announced the pause and said a recession was no longer their base-case forecast for the economy. The firm had put a recession as their base case for the economy earlier Wednesday after Trump's latest tariffs were put in place.

 

Goldman still sees weak growth this year, with the economy growing just 0.5% year over year in the fourth quarter. The investment firm sees a still-elevated 45% probability of a recession, and thinks the Fed will engineer three consecutive 25-basis-point "insurance" cuts in June, July and September, the economic team said in an email.

 

Trump's 90-day pause ends on July 8. The Fed interest-rate committee meets on June 17-18 and July 29-30.

 

Justin Wolfers, an economics professor at the University of Michigan, said it was a mistake to say that "Tariffmageddon" is over.

 

"The U.S. will still have the highest tariffs in the industrialized world, perhaps 10-20 times that of most of our trading partners and roughly 10 times higher than it was before. These are still at or above the Depression-era Smoot-Hawley tariffs," Wolfers wrote, in a post on X.

 

Some economists think the 90-day pause will eventually become permanent.

 

Paul Ashworth, chief North America economist at Capital Economics, said his firm's working assumption now will be that "cowed by the market response, Trump will repeatedly extend the 'pause,' meaning that this will end up looking a lot like the 10% universal tariff that he campaigned on."

 

Stephen Stanley, chief U.S. economist at Santander, said it remains an open question whether the pause is sufficient to provide businesses with enough certainty to re-engage on business investment and hiring.

 

"If it does, then the much-ballyhooed recession is already over," he said.

 

-Greg Robb

 

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04-09-25 1638ET

 
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