President Trump has privately acknowledged that his new tariff plan could plunge the US economy into recession. However, he expressed a desire to avoid triggering a wider depression, according to The Wall Street Journal. He reportedly told advisors he was willing to endure economic hardships but ultimately reversed course under pressure from bond market fluctuations. [
The plan, designed to protect US industries with significant tariffs, has sparked fears of slower global trade and potential economic stagnation. Despite the growing risk of recession, experts haven’t predicted the more severe consequences of a depression, which historically encompasses prolonged downturns and rising unemployment.
The U.S. hasn’t experienced a full-blown depression since the Great Depression in the 1930s, when unemployment reached 25%. Modern economic safeguards like fiscal tools, monetary policy, and federal guarantees have helped prevent such extreme scenarios.
Financial markets reacted swiftly to Trump’s tariff changes. Bond yields surged, stocks fell, and investor anxiety heightened. The yield on the 10-year Treasury note briefly exceeded 4.5%, with speculation of major bondholders like Japan and China selling off U.S. bonds. As yields climbed, bond prices declined.
Trump eventually reversed some tariffs in a move that helped stabilize markets. The S&P 500 saw its largest one-day gain since 2008, demonstrating a significant market recovery.
National Economic Council Director Kevin Hassett highlighted the impact of market turmoil on Trump’s decision to change course. He stated: “There’s no doubt that what happened in the bond market yesterday added perhaps a little more urgency to the decision.