Trump's uncertainty and the risk of an avoidable recession

[UNITED STATES] The global economy is always susceptible to various factors, both external and internal, that could cause downturns, slowdowns, or recessions. While economic cycles naturally ebb and flow, certain actions or uncertainties can amplify or mitigate these fluctuations. One such factor that has raised concerns in recent years is the political unpredictability surrounding former U.S. President Donald Trump. With his return to the political scene, the "Trump effect" has been a subject of intense debate for its potential to influence both domestic and global markets.

Recent assessments suggest that Trump's continued uncertainty and inconsistent policy positions could risk triggering an “avoidable” recession in the United States, a concern that is exacerbated by his unconventional leadership style. This article explores the risks associated with the uncertainty surrounding Trump's policies and how they could contribute to an economic downturn, especially in light of lessons learned from past market instability during his presidency.

The Roots of Economic Uncertainty

The term "economic uncertainty" often refers to the unpredictable nature of fiscal policy, trade relations, and regulatory environments. In the case of Donald Trump, his tenure as president (2017-2021) was marked by frequent policy shifts, conflicting statements, and abrupt changes to key economic measures like tariffs, taxes, and regulations. His foreign policy decisions, such as the trade war with China and withdrawal from international agreements, also left businesses uncertain about their long-term strategy.

In 2025, with Trump considering a political comeback, the uncertainty surrounding his possible return to the presidency has intensified. The unpredictable nature of Trump's leadership style remains a significant factor that could once again threaten economic stability. According to many economists, the risk of an avoidable recession is linked to how this uncertainty affects market confidence, business investment, and consumer sentiment.

The Impact of Uncertainty on Economic Confidence

One of the key drivers of economic growth is consumer and business confidence. When consumers feel secure in their financial future, they are more likely to spend, which in turn drives demand for goods and services. Similarly, businesses invest in expansion and innovation when they have a clear understanding of government policies and regulations.

However, when there is significant uncertainty about future policies, confidence can quickly erode. During Trump’s initial term, this was evident in several key areas:

Trade Wars: Trump's aggressive stance on trade and tariffs, especially with China, caused upheaval in the global market. Businesses found it difficult to plan long-term strategies due to the potential for sudden tariff hikes or trade policy changes.

Regulatory Inconsistency: Trump’s administration was marked by rolling back many regulations, followed by proposals for new ones, often without clear long-term strategies. For industries dependent on predictable regulations—such as finance, energy, and healthcare—this created an environment of unpredictability.

Tax Cuts and Spending: The massive tax cuts in 2017 aimed at stimulating economic growth had mixed results, and many economists argue that they disproportionately benefited the wealthy and increased the national deficit. Trump's approach to fiscal policy was often reactive, without a clear strategy for balancing long-term growth and debt reduction.

This uncertainty was felt not only in the United States but also in global markets. The uncertainty surrounding trade policies and tariffs caused a ripple effect, destabilizing international trade and prompting businesses to hedge their investments.

Risk of Recession in 2025: Is It Avoidable?

As the 2025 election approaches, many economists are concerned about the potential for another recession, particularly if Trump returns to power. The unpredictable nature of his policies could once again derail the economic recovery that the country is currently experiencing post-pandemic.

In a recent analysis, an expert commented, “While the economy is showing some signs of recovery, the uncertainty surrounding Trump's potential policies could derail this progress. It could lead to an ‘avoidable’ recession, one that occurs because of fear and unpredictability rather than fundamental economic weaknesses.”

This highlights an essential point: recessions are not always inevitable. Much depends on the decisions made by policymakers and the confidence that businesses and consumers have in the future. If a potential Trump administration returns with the same levels of unpredictability seen during his first term, it could contribute to the conditions for a recession.

How Political Instability Amplifies Recession Risks

The risk of recession linked to Trump’s uncertainty is not just about specific policies, but also the broader political instability that his leadership style can induce. In a democratic system, stability in political institutions and policy direction is key to maintaining investor and consumer confidence. Trump's leadership, marked by frequent clashes with Congress, the judiciary, and even within his own party, contributed to political instability.

An uncertain political environment makes it harder for businesses to plan for the future, especially in an interconnected global economy where long-term contracts and investments are essential. For example, businesses in the manufacturing and tech sectors could face additional hurdles if trade relations with key partners like China or the European Union are again jeopardized. The risk of punitive tariffs, sanctions, or abrupt policy shifts could discourage investment, leading to slowdowns in production and hiring.

Trump’s Economic Record: The Dual Impact

During his presidency, Trump’s policies created both short-term economic booms and long-term structural concerns. On the one hand, his tax cuts and deregulation policies helped stimulate economic growth, particularly in certain sectors such as finance and energy. Unemployment fell to record lows, and stock markets saw significant gains. However, these gains were often short-lived and were offset by long-term concerns about national debt, income inequality, and trade imbalances.

In 2025, if Trump’s policies are once again geared toward short-term economic boosts through measures like tax cuts and deregulation, there could be similar short-term benefits. However, these policies might also exacerbate long-term economic risks. The risk of fiscal irresponsibility, such as ballooning deficits, combined with global trade tensions, could ultimately lead to an economic slowdown or recession.

The Role of Global Markets in the U.S. Economy

Given the interdependent nature of global economies, the uncertainty surrounding Trump’s potential return to office could have far-reaching effects on international markets. Trump’s foreign policy, especially his "America First" approach, led to tensions with key trading partners and reduced the U.S.'s standing in international negotiations.

The risk of international trade disruptions or the rollback of international agreements could negatively impact U.S. businesses that rely on global supply chains. Furthermore, any erosion of the U.S.'s global leadership role could result in lower investment flows into the country, further exacerbating the risk of a recession.

While the U.S. economy may seem to be on a stable trajectory, it is clear that significant risks remain—especially with the uncertainty surrounding Trump’s political future. The risk of an “avoidable” recession, driven by political instability and economic unpredictability, is real. This scenario would not arise from fundamental flaws in the economy, but from the fear and hesitation created by uncertain leadership.

To avoid a recession, it is crucial for U.S. policymakers, whether led by Trump or someone else, to provide clarity and stability in their economic policies. Clear communication, consistent trade policies, and a commitment to long-term fiscal responsibility can help to maintain economic growth while reducing the risks of a downturn.

If Trump returns to office, the uncertainty surrounding his decisions will likely continue to be a major factor influencing economic outcomes. Whether this uncertainty leads to growth or triggers a recession depends largely on the nature of his policy choices and their impact on consumer and business confidence.

While economic cycles naturally involve ups and downs, the risks posed by political uncertainty—especially the uncertainty surrounding Donald Trump—could make a potential recession more likely and more avoidable. The economic world is watching closely, and only time will tell how the next phase of political leadership shapes the future of the U.S. economy.