Despite growing concerns over a potential recession, a key economic adviser to President Donald Trump reassured the public on Monday, arguing that the U.S. economy remains on solid footing. Kevin Hassett, head of the National Economic Council, countered fears of economic downturn by emphasizing the positive impact of Trump’s tariff policies. His statements came as stock markets took a sharp plunge and consumer confidence surveys indicated increasing pessimism.
In an interview with CNBC, Hassett acknowledged short-term economic fluctuations but insisted they were temporary. “There are a lot of reasons to be extremely bullish about the economy going forward. But for sure, this quarter, there are some blips in the data,” he said. He attributed these setbacks to the rapid pace of Trump’s tariff decisions and what he described as the “Biden inheritance.”
The Impact of Tariffs
Trump’s tariffs on Canada, China, and Mexico, according to Hassett, were already yielding results by encouraging manufacturing and job growth within the United States. However, several economic indicators have suggested a weakening trend. The New York Federal Reserve’s latest Survey of Consumer Expectations found that households were increasingly pessimistic about their financial future, with concerns over unemployment and credit access worsening. The percentage of households expecting a rise in the jobless rate reached its highest point since September 2023.
Meanwhile, the Atlanta Federal Reserve’s GDPNow tracker signaled that the economy might contract in the first quarter, largely due to trade disruptions. Hassett, however, dismissed such concerns, labeling the contraction as a “very temporary phenomenon.” He pointed to a historical trend where businesses pause investments following major elections and predicted that economic uncertainty would ease by April.
Stock Market Reaction and Economic Concerns
Markets reacted negatively to Trump’s tariff policies, with major U.S. stock indexes experiencing their largest drop since his presidency began. The S&P 500, which had reached record highs in mid-February, fell 2.7%, while the Nasdaq tumbled 4%, bringing both to their lowest levels since September. The uncertainty surrounding tariffs and their potential economic fallout fueled investor fears.
“Trump was seen as the market’s savior, promising lower taxes and less stringent regulation. Now, his actions represent the harbinger of doom,” remarked Dan Coatsworth, an investment analyst at AJ Bell in London. “The ‘R’ word is back on everyone’s lips as people ponder if trade tariffs will backfire and lead to recession rather than U.S. economic prosperity.”
Rising Recession Risks
A recent Reuters survey of economists highlighted increasing risks for the economies of Mexico, Canada, and the U.S. due to the erratic implementation of tariffs. Among 74 economists surveyed across the three countries, 70 indicated that the risk of recession had grown. Additionally, many predicted inflationary pressures to rise in the U.S.
Goldman Sachs economists revised their 2025 U.S. growth forecast downward, citing the impact of tariffs. “Both on the back of more adverse tariff assumptions,” they stated, noting that their growth estimates were now below consensus for the first time in two-and-a-half years. Trump’s economic strategy includes an additional 20% tariff on Chinese goods and 25% tariffs on imports from Canada and Mexico, though most of these duties have been temporarily suspended until April 2. At that time, Trump plans to unveil a global framework of reciprocal tariffs.
The Role of Tax Cuts
Despite concerns, Hassett maintained a positive outlook, arguing that Trump’s tax cuts would stimulate the economy, drive investment, and boost wages by the second quarter. “Just be very wary … of conversations about recession,” he cautioned. “What I think that what’s going to happen is the first quarter is going to squeak into the positive category, and then the second quarter is going to take off as everybody sees the reality of the tax cuts.”
Some business leaders remain hopeful but cautious. Austin Ramirez, president and CEO of hydraulic equipment maker Husco, supported Trump’s promises of tax and regulatory reforms, noting that they could benefit businesses. However, he expressed concerns about the negative impact of tariffs. “Now, the worry is that it’s all the bad stuff happening, and none of the good stuff,” Ramirez said.
Looking Ahead
As the debate over Trump’s economic policies continues, the impact of tariffs and tax cuts remains a contentious issue. While Hassett and the administration project confidence, market reactions and economic forecasts suggest that uncertainty remains a key challenge. The coming months will be critical in determining whether Trump’s policies will deliver the promised economic prosperity or lead to further instability.