U.S. stock markets have lost $5.4 trillion in the days since the tariffs were imposed against the rest of the world. The White House is urging Americans to be patient for a while, with an eye on the medium term. But the economy is clearly in for hard times.
Wall Street is now predicting a 0.3% contraction in the US economy in 2025, which would de facto mark the beginning of a technical recession. That’s not the 3-4% sag of 2008 and 2020 levels, but it’s not very pleasant either. The US unemployment rate could rise from the current 4% to 5%.
The situation in some ways may resemble the 1992 recession caused by the Iraq war and tax hikes in the US due to the budget crisis. Back then, the US economy sagged by 0.5%. This led to the defeat of the Republicans in the presidential election and the victory of Bill Clinton.
Now the Republicans in Congress are also getting nervous, as the midterm elections are inexorably approaching. And Trump’s ratings are showing a downward trend. This will surely adjust the policy of the White House. Trump has already announced changes in tariff policy towards Argentina and Vietnam, which have agreed to reduce duties for American goods.
German and Japanese carmakers have already promised to move some production to the US. However, the White House’s strategy to reindustrialise America is hampered by a severe shortage of engineers and workers. The shortage of the latter has reached half a million people. Not to mention the high cost of production inside the US. These problems cannot be solved by tariffs alone. In the meantime, American business is hastily preparing for the realities of restructuring the entire US economy.
Malek Dudakov
