US President Donald Trump has described the current state of the US economy as a “period of transition” while refusing to confirm whether the country is facing an impending recession or rising prices due to the escalating trade war with China.
Speaking in an interview with Fox News, which was recorded last Thursday but aired on Sunday, Trump stated: “I hate to predict things like that. There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing. It takes a little time, but I think it should be great for us.”
The comments follow a turbulent week for US financial markets as investors reacted to the administration’s shifting stance on key tariff policies. Trump recently imposed new 25% tariffs on imports from Mexico and Canada, only to roll back exemptions for many of those goods within two days. Additionally, he doubled tariffs on goods from China, raising them to 20% in an effort to curb what he claims is unfair trade.
In response, China announced new retaliatory tariffs on US agricultural goods, effective Monday. These tariffs, ranging from 10 per cent to 15 per cent, target key American exports such as chicken, beef, pork, wheat, and soybeans. Han Shen Lin, China country director at consultancy firm The Asia Group, told the BBC’s Today programme: “You’re seeing a lot of tit-for-tat between both sides to demonstrate that neither side will back off easily. That said, China has realised it probably can’t export its way to GDP growth the way it used to, so it is focusing a lot more on the domestic economy right now.”
The latest tariff battle has added to growing concerns among businesses and investors. Since Trump initiated the trade war with the US’s top trading partners, stock markets have witnessed significant declines. Many investors fear that escalating tariffs will drive up prices for consumers and slow down economic growth.
Commerce Secretary Howard Lutnick addressed these concerns during an interview with NBC, stating that while “foreign goods may get a little more expensive, American goods are going to get cheaper.” However, when pressed on whether the economy could be heading toward a recession, Lutnick firmly dismissed the idea: “Absolutely not… There’s going to be no recession in America.”
Meanwhile, Frank Lavin, a former US Commerce Department official, said in an interview with the BBC that while tariffs remain a “burden on the US economy,” he does not expect the trade war to escalate out of control. “Tariffs will eventually fade a bit,” he suggested, although he acknowledged they could still slow economic growth.
Inflation Risks and Consumer Impact
Investment experts believe that the current trade policies will likely lead to inflation. Rachel Winter, investment manager at Killik & Co, remarked on the BBC’s Today programme that Trump’s tariffs would undoubtedly push inflation higher in the near future. “Tariffs are theoretically inflationary, and the level of tariffs that Trump is imposing, I think no doubt, will have to cause inflation somewhere down the line,” she explained.
Beyond tariffs, Trump has also taken a hard stance against China, Mexico, and Canada, accusing them of not doing enough to curb the flow of illegal drugs and migrants into the US. However, all three nations have rejected these claims, adding further strain to diplomatic relations.
The latest policy shifts come as Trump navigates a challenging political landscape ahead of the 2025 presidential race. With inflation concerns rising and financial markets reacting to ongoing trade disputes, economists and investors remain wary of the long-term impact on the US economy. While Trump insists that the current economic adjustments are temporary, business leaders and analysts caution that the effects of the trade war may last longer than anticipated.
