Trump policies ‘promise’ an economic downturn, says prominent forecaster in first-ever ‘recession watch’

The UCLA Anderson Forecast recently issued its first-ever “recession watch,” citing significant changes to the economy as a result of the policies implemented by the Trump administration. The forecast, which has been providing economic predictions since 1952, expressed concerns that the administration’s tariff and immigration policies, along with plans to reduce the federal workforce, could potentially lead to an economic contraction.

According to UCLA Anderson’s analysis titled “Trump Policies, If Fully Enacted, Promise a Recession,” there are no immediate signs of a recession, but the possibility of one forming in the near future is a real concern. U.S. recessions are officially declared by the Business Cycle Dating Committee of the National Bureau of Economic Research, which considers various indicators such as production, employment, income, and growth to determine if the economy is contracting.

The average respondent to the CNBC Fed Survey for March indicated a 36% probability of a recession in the next year, up from 23% in the previous month. However, this probability remains below the 50% level seen in the aftermath of the pandemic in 2022 and 2023, which turned out to be incorrect. The difficulty in predicting recessions underscores the complexity of determining the state of the economy.

The UCLA Anderson Forecast highlighted that reductions in the workforce due to immigration policies, tariffs leading to price increases and potential manufacturing sector contractions, as well as changes in federal spending impacting government and private sector employment, could collectively contribute to a recession.

Administration officials have not outright dismissed the possibility of a recession resulting from their policies. President Trump mentioned a “period of transition,” while the Commerce Secretary suggested that a recession would be justified by the eventual gains from the policies being implemented. Recessions often stem from unexpected shocks to the economy, and the recent shifts in business and consumer sentiment following the implementation of certain policies indicate a lack of preparedness for their impact.

The UCLA Anderson Forecast refrained from providing a specific timeline for a potential recession but indicated that one could manifest in the next year or two. The report noted emerging weaknesses in household spending patterns and highlighted risks in the financial sector, which could exacerbate any downturn. Additionally, the forecast warned that the recession could potentially be stagflationary, characterized by a combination of stagnant economic growth and high inflation.

In conclusion, the possibility of a recession looms as a result of the Trump administration’s policies, according to the UCLA Anderson Forecast. It is essential for policymakers and economists to closely monitor economic indicators and potential risks to mitigate the impact of a potential downturn.