Economic experts have told The Independent the risk of a global recession remains despite the 90-day delay in Donald Trump’s aggressive tariff increases.
Trump made an abrupt U-turn on Wednesday when he announced the three-month pause to all affected countries bar China, following economic meltdown and widespread backlash.
But Pau S Pujolas, who wrote a study that was cited by the Trump administration to justify the tariff hikes, says the president’s “recklessness” means it may be too little, too late.
“Yes, the damage is done,” he said. “Global value chains are suffering with all the recklessness, uncertainty is a good friend of recession.
“This is not a serious way to manage an economy. Firms and households need clear, predictable policies to take the right decisions and make the economy blossom.”
Even if Trump decides not to reintroduce the high tariffs, the global economic risk remains “until either Trump stops playing the tariff game, or Congress removes the power vested on the president”, the associate professor at McMaster University in Canada added.
Economist Justin Wolfers agreed there would be lasting consequences despite the pause, as the president has shown he will say something one day and change his mind the next.
“The damage there is very, very lasting and very profound, because basically, he has shown he’s completely unreliable,” he told The Independent.
The Trump administration had announced aggressive tariff increases on nearly all of its trading partners, slapping levies of more than 30 per cent on some of the world’s weakest economies and placing a minimum tariff of 10 per cent on almost everyone else.
But after creating market turmoil, which was estimated to have wiped trillions off global stock markets by Tuesday, the president abruptly announced he would pause the hikes for 90 days, with the exception of the widespread 10 per cent levy, while also raising duties on China by an additional 125 per cent.
Wolfers, a professor of economics at the University of Michigan, said while pressing pause on the major levies had changed the risk of a global recession, it had done so “by less than you think”.
Even with the delay on tariffs of more than 30 per cent on some countries, with the previously increased tariffs on steel and cars, the US still has some of the highest tariffs in the world, he said.
“The tariff rate has fallen from maybe, you know, 20 times that of our trading partners, to be 15 times that of our trading partners. So it went from absurd to ridiculous,” he said.
Betting markets had recession odds at about 68 per cent on Wednesday morning, and those odds had fallen by Wednesday afternoon after the U-turn but were still at 53 per cent, Prof Wolfers said.
