Are tariffs pushing the U.S. toward long-term recession?

Image: — © AFP Richard A. Brooks

Global stock markets are volatile as a result of President Donald Trump’s widespread tariff announcements, even though it has been primarily reduced to a focus on China. Nevertheless, despite the thumb of Trump pressing the pause button, the issue has not gone away and tariffs along with other economic measures can surface at any time.

As things stand, tariffs on U.S. imports will remain at the highest level since the 1930s. Furthermore, reductions were supposed to only happen after a detailed negotiated settlement with each impacted country.

Is the U.S. headed for a recession?

This is more complex than it appears…

The short answer from Virginia Tech economists and policy experts Jadrian Wooten, David Bieri, and Dimitris Tsarouhas is no, not yet, but it is getting close. The economists break down the warning signs, how trade policy could tip the balance, and what it means for jobs, consumers, and the broader economy.

What signs point toward a potential recession?

“I’m watching consumer spending and job growth — especially in sectors that are sensitive to changes in the interest rate, like housing,” said Wooten, a collegiate associate professor of economics in the College of Science. “If people start holding off big purchases, that’s a red flag. So far, the labor market has held up well, but another increase in inflation could ruin that.”

Bieri adds that consumer spending is starting to soften, business investment is down, and the yield curve is inverted. “Add to that slowing global growth and uncertainty in manufacturing and exports, and the signs point to a fragile outlook,” he said. “Labor markets are holding for now, but wage growth has slowed, and household debt is rising.”

Could tariffs tip the U.S. over the edge?

“Tariffs generally raise costs by making imports more expensive. That tends to slow spending and economic growth,” Wooten explained. “It can also disrupt supply chains and discourage companies from investing. Uncertainty around trade policy only makes things worse. When companies don’t know what rules they’re operating under, they delay hiring and expansion, which weakens economic momentum.”

Bieri said tariffs act as a shock amplifier. “If President Trump’s trade policies escalate or become less targeted, they could easily tip a slowing economy into recession and even trigger more market turmoil.”

Could retaliatory tariffs from other countries drag us into a deeper economic slump?

If you punch me, I’ll punch you back harder.

“At this moment, nerves are frayed — both on Wall Street and Main Street,” said Tsarouhas, associate professor and expert on international affairs in the College of Liberal Arts and Human Sciences. “If other countries hit back with their own tariffs, we could see a dip in GDP growth in fiscal year 2025. The consequences for the world economy could be pretty dramatic.”

Bieri agreed, noting that “in today’s fragile economy, tariffs could easily upset the balance, especially in industries that rely on exports or foreign components. They may be politically appealing, but they often backfire economically.”

How have moves like this affected economies in the past?

History is a series of repeating lessons.

“Historically, protectionist moves during downturns have made recessions worse,” said Bieri. Both he and Wooten point to the Smoot-Hawley Tariff Act of the 1930s, which deepened the Great Depression by shrinking global trade.

“It triggered retaliatory tariffs which added new costs and uncertainty, ultimately accelerating a downturn rather than preventing one,” Wooten explained.

Bieri also pointed to more recent events, like the steel tariffs in the early 2000s. “The economic gains were marginal while the ripple effects were negative.”

Could interest rate cuts help?

Can central banks manipulate the markets and pull things back to the status quo?

“The Federal Reserve looks at inflation, job growth, and overall economic activity — not political pressure — when setting rates,” Wooten said. “With inflation still above target, they’ve been cautious about cutting rates too soon. If growth slows significantly or the job market weakens, that might lead to cuts. For now, staying the course seems more likely.”

Tsarouhas added: “The Fed could soon be in a tough spot. If economic prospects worsen and a technical recession (two quarters of negative growth) happen, the Fed may feel compelled to act and lower rates. On the other hand, inflation fears remain strong, and the danger of overheating the economy will feature strongly too”.

What is the impact on consumers and jobs?

Are jobs at risk? Probably.

“Tariffs raise prices on everyday goods — food, electronics, clothing — which eat into consumers’ purchasing power,” said Wooten. “That can lead to less spending, which hurts businesses. If enough sectors are hit, hiring slows, and the economy weakens.”

How does the U.S. avoid a recession?

It may well be too late, as a result of Trump’s folly. If there are glimmers of finacial hope…

“Policy coordination is key,” Bieri said. “That means targeted stimulus, certainty in trade policy, and if necessary, measured monetary easing. But perhaps most important: avoid self-inflicted wounds like broad, poorly timed tariffs. The private sector needs clarity and stability — not whiplash.”