Trump Claims a Recession Could Be Beneficial, but Economists Remain Doubtful

Typically, presidents strive to prevent recessions, often going so far as to avoid mentioning the term entirely.

However, in recent weeks, President Trump and his team have conveyed a markedly different perspective. They acknowledge a possible recession while suggesting it might not be as detrimental as feared.

Commerce Secretary Howard Lutnick has stated that Mr. Trump’s policies are “worth it” even with the risk of a recession. Treasury Secretary Scott Bessent mentioned that the economy might necessitate a “detox period” due to its reliance on government spending. Furthermore, Mr. Trump has indicated that his administration will undergo a “period of transition” as his policies are implemented.

These remarks may partially indicate an effort to synchronize political rhetoric with economic reality. Mr. Trump pledged to combat inflation “starting on Day 1” and asserted in his inaugural address that “the golden age of America begins right now.”

Yet inflation has persisted stubbornly, and even though Mr. Trump has been in power for under two months, economists caution that his tariffs are likely exacerbating the situation. Indicators of consumer and business confidence have plummeted, and stock prices have declined significantly, largely attributed to Mr. Trump’s policies and the uncertainty surrounding them.

“This language reflects the situation where your policies aren’t performing well, and it’s clear that they are negatively affecting people,” noted Sean Vanatta, a financial historian at the University of Glasgow in Scotland.

The Trump administration and its backers contend that their objectives extend far beyond mere political messaging. They assert their aim is to decrease imports, revive manufacturing jobs, and “re-industrialize” the American economy. They believe that, even with short-term price increases, American workers will benefit in the long run.

“The trade-off between short-term discomfort and long-term advantages can indeed be significant and worthwhile to pursue,” remarked Oren Cass, founder of American Compass, a conservative research organization supportive of many of Mr. Trump’s economic strategies. “It’s genuinely encouraging to witness political leaders willing to be open about that.”

Nonetheless, even Mr. Cass critiqued the administration’s inconsistent tariff approach, which he suggested could undermine the effectiveness of the policy.

While many economists acknowledge the necessity for presidents to inflict temporary discomfort to achieve long-term objectives, few are inclined to endorse the specific policies the Trump administration has adopted.

“The notion of short-term pain for long-term gain is not inherently unreasonable,” explained Greg Mankiw, a Harvard economist who chaired the Council of Economic Advisers under President George W. Bush. However, he argued that Mr. Trump’s trade policies seem to result in “short-term pain for even greater long-term pain.”

Trade wars, tariffs, and prices

One type of short-term discomfort acknowledged by Mr. Trump and his aides is the increase in prices for imported goods due to tariffs. Mr. Bessent characterized this as an essential, albeit challenging, step toward reducing American dependence on inexpensive foreign products, particularly those from China.

“The American dream does not rely on inexpensive trinkets from China,” Mr. Bessent proclaimed on “Meet the Press” on Sunday. “It encompasses more than that. We are focusing on affordability, including mortgages, vehicles, and real wage increases.”

Conversely, many economists refute the idea that reducing imports will ultimately benefit Americans. While they recognize that competition from lower-cost international producers has adversely affected certain U.S. sectors, they argue that it has generally enriched Americans—lower prices effectively serve as a pay raise, providing consumers with more disposable income for goods and services.

However, even with the intent to minimize imports, economists argue that broad tariffs like those threatened and implemented by Mr. Trump will prove ineffective. This is due to the fact that the tariffs affect not only consumer products but also the components and materials that U.S. manufacturers need to create their goods, thus raising costs for both domestic and foreign consumers alike.

“If their aim is re-industrialization, they will likely discover that tariffs hinder rather than help,” stated Kimberly Clausing, a professor at the University of California, Los Angeles, who previously worked in the Treasury Department during the Biden administration. “Producing goods in America becomes significantly more challenging when all inputs are costlier.”

In recent years, some economists have begun to critically evaluate their discipline’s traditional views on free trade. David Autor, an M.I.T. economist, has conducted impactful research revealing that the influx of inexpensive goods from China since 2000 resulted in a swift decline of U.S. manufacturing jobs, negatively affecting numerous workers and communities long-term—an event referred to as the “China shock.”

However, Mr. Autor asserts that current tariffs cannot reverse a phenomenon that occurred decades ago—and it makes little sense to attempt to revive the textile mills and mass-market furniture factories that the China shock obliterated.

Instead, Mr. Autor suggests that policymakers should prioritize preserving and bolstering the higher-value manufacturing sectors that stimulate innovation. While tariffs could be part of that strategy, he advocates for targeting specific industries and accompanying them with subsidies to promote investment. The Biden administration pursued this approach with legislation supporting investments in semiconductor manufacturing and green energy, a strategy Mr. Trump has, to date, forsaken.

“It cannot merely be a tariff narrative,” Mr. Autor contended. “Investment must be involved.”

Deficits and spending

Economists are more inclined to agree with another of Mr. Bessent’s claims: that the economy has grown overly reliant on government spending.

There is a consensus among economists across the spectrum that the government should refrain from running multitrillion-dollar deficits amidst times of low unemployment when tax revenues typically remain robust, rendering government spending unnecessary for economic stimulation. While it may be challenging to reduce deficits now—requiring spending cuts and tax increases—the consequences of postponing action until the deficit becomes a crisis are likely to be far worse.

“The longer we delay, the greater the suffering will be,” advised Alan J. Auerbach, an economist at the University of California, Berkeley, who has spent years analyzing the federal budget.

The difficulty, Mr. Auerbach and other economists note, is that nothing proposed by the Trump administration would effectively address the deficit. Elon Musk’s Department of Government Efficiency has cut jobs and terminated programs, but those measures impact only a small fraction of the federal budget.

In the budget framework passed by Congressional Republicans last month, more substantial cuts aimed at Medicaid were proposed. However, instead of pairing those cuts with tax increases, the Republican plan would extend Mr. Trump’s 2017 tax cuts, which would ultimately exacerbate the deficit significantly.

Who bears the costs?

According to most independent analyses, the 2017 tax cuts disproportionately favored higher-income households. Cuts to Medicaid would primarily affect low- and moderate-income families, as would reductions in other government services. Similarly, tariffs often impact poorer households the hardest since they allocate a larger portion of their budgets to essentials like food, clothing, and other imported items.

The temporary difficulties engendered by the administration’s policies could, therefore, disproportionately burden low-income Americans—many of whom supported Mr. Trump in hopes of enhancing their financial situations.

“It’s difficult to comprehend how Trump’s supporters will benefit,” asserted Ms. Clausing, the former Treasury official. “Prices will rise, disruptions will increase, and the safety net will shrink.”

Even some of the advocates of Mr. Trump’s policies, like Mr. Cass, contend that reducing benefits to finance tax cuts contradicts the administration’s professed aim of revitalizing the middle class.

“The tax component is certainly a complicated issue,” he remarked.

Moreover, a recession would likely have a severe impact on those in lower-wage and less educated jobs, particularly among Black and Hispanic workers, as noted by Jessica Fulton, vice president of policy at the Joint Center for Political and Economic Studies, which focuses on issues affecting Black Americans.

Additionally, even if a downturn is brief, the repercussions could be long-lasting. Economic studies have shown that individuals who lose jobs during a recession or who graduate into one may experience long-term detrimental effects on their careers.

“Discussing temporary harm overlooks the reality that the consequences of this administration’s choices will be felt for years,” Ms. Fulton remarked.