Amid concerns of a potential recession fueled by President Trump’s trade war and federal job cuts, forecasters indicate that the U.S. economy is currently holding steady due to consumer financial stability and business optimism. However, economists are adjusting their forecasts, citing rising inflation and downgraded growth estimates for 2025. The threat of impending tariffs on imported goods could significantly impact consumer prices and purchasing power, leading to decreased investment and hiring.

Economists highlight the risk of recession if all planned tariffs are implemented, with odds currently estimated at 35% to 40% by various financial institutions. The article explores the potential impact of tariffs on various sectors, including steel, aluminum, and imports from China, Canada, and Mexico.

Although consumer confidence has taken a hit, essential spending remains resilient, buoyed by job growth and wage increases. Yet, recent indicators such as declining consumer spending and increased job cuts signal potential cracks in the economy. The stock market’s recent downturn and the looming threat of stagflation pose challenges for the Federal Reserve in managing interest rates to balance economic growth and inflation.

While some forecasters predict a slowdown in growth without entering a recession, the possibility of a contraction looms if all tariffs are imposed. The uncertain economic landscape presents a complex scenario for policymakers as they navigate the delicate balance between stimulating growth and containing inflation.