Is the U.S. Heading Into a Recession Amid Trump’s Tariffs? ‘Liberation Day’ Fallout Sparks Fresh Fears

On April 2, President Donald Trump held his long-promised “Liberation Day,” during which he took to the Rose Garden of the White House and announced a vast swath of tariffs that he will be implementing. 

Trump’s “Liberation Day” moves saw the introduction of a 10% tariff on all imported goods, and additional import taxes—of varying degrees—placed on 60 other countries.

The U.S. and global markets have already started to feel the impact of Trump’s tariffs, with the U.S. stock market taking the worst hit thus far. At the end of Thursday, April 3, Dow Jones closed at 1,700 points lower. Plus, the S&P 500 and Nasdaq indexes had their worst day since 2020. Thursday also ended with the U.S. dollar dipping to a six-month low against the EURO, falling along with U.S. bond yields.

On Friday, April 4, morning reports showed that the S&P 500 index was down 193 points (3.58%).

The Wall Street slump and global dip in stocks has sparked fresh fears in economists and concerns as to whether the U.S. is heading into a recession.

Read More: Trump Announces Sweeping Tariffs in Bid to Reshape U.S. Economy and World Order

However, in the midst of the market turmoil, a news release from the Bureau of Labor Statistics on Friday showed a stronger-than-expected employment report, with 228,000 jobs created in March.

Trump addressed the employment numbers in a Truth Social post on Friday morning, stating that the report was “far better than expected.” “It’s already working,” he wrote. “Hang tough, we can’t lose.”

Felix Tintelnot, associate professor of economics at Duke University, says that though tariffs are meant to stimulate economic growth and production in the U.S., the uncertainty generated from the Trump Administration’s tariff delays and changes has had the opposite effect.

“Looking back over the last few weeks, we have had so many revisions to past tariff proposals that it's really difficult to tell for decision-makers in the industry what the tariff policy will be in the next couple of months, and then the rational response to that is to delay investment,” Tintelnot says, remarking that people are expecting even further changes. “If everyone does that, then you're generating a recession.”

Here’s what you need to know about the fresh recession fears amid Trump’s highly controversial tariffs. 

What tariffs did Trump announce on April 2?

Trump had initially publicized his tariffs as “reciprocal tariffs”—meaning taxes on other countries equal to the existing tariffs foreign countries have set against American goods.

However, the tariffs announced on Trump’s “Liberation Day” were not, in fact, reciprocally calculated but instead were calculated based on countries’ U.S. trade deficit levels. Countries with which the U.S. has a higher trade deficit received a higher tariff.

In addition to this, the math used by the Trump Administration to come up with these tariffs also factored in each country's exports to the U.S.

Per an Axios breakdown: "The formula is to divide the U.S. trade deficit with each country by that country's exports to the U.S. The final reciprocal tariff was then divided by 2, with a minimum of 10% (which applies even to those countries with which the U.S. has a trade surplus)."

Tintelnot says that the logic is confusing—for example, Israel eliminated tariffs on U.S. goods on April 1, but were still hit hard by a 17% tariff in the April 2 announcement. The resounding response from the global economist community has been one of confusion about how exactly the incremental tariffs added on top of the 10% tariffs was calculated.

“It’s murky,” says Brian Bethune, professor of economics at Boston College, emphasizing his belief that the tariffs are likely to change again, adding even more “uncertainty” to trade policies.

“The fact that countries that charge zero tariffs on the U.S. have been hit with tariffs illustrates that these are not reciprocal tariffs in their true meaning,” Tintelnot says, in agreement. “It is perfectly normal in an integrated global economy for a bilateral trade deficit to exist. A little introspection helps: You have a bilateral trade deficit with your grocery store, but a bilateral trade surplus with your employer. Why would you put a tariff on your local grocery store?”

Tintelnot also notes that this method of tariff calculation hits a wall because “trade deficit can change.” This only adds to the uncertainty already being expressed by businesses, and again, economists are in agreement that uncertainty is not good for recession calculations and only fuels the risk.

Per analysis conducted by The Budget Lab at Yale, Trump’s April 2 tariffs are the equivalent of a rise in the effective U.S. tariff rate of 11.5 percentage points. “The average effective U.S. tariff rate after incorporating all 2025 tariffs is now 22 ½%, the highest since 1909,” per the policy research center’s data.

Some countries, including Brazil, are seemingly intending to impose retaliatory tariffs back onto the U.S., thus raising concerns of a far-reaching trade war.

On Friday, China announced that they will respond with a 34% retaliatory tariff on U.S. goods beginning on April 10, matching the U.S.’ “Liberation Day” tariffs placed on them.

Although Canada has not been hit with the so-called reciprocal tariffs issued on April 2, the auto industry-related tariffs and others will impact Canada. In a public address on April 3, the newly-instated Canadian Prime Minister Mark Carney said: "Three different sets of U.S. tariffs remain in place and will continue to pose significant threats to Canadian workers and business. They are all unjustified, unwarranted, and in our judgement, misguided.”

Tintelnot highlights that it’s important to note how “extreme” all of Trump’s tariffs are. “There is no other industrialized country currently in the world that charges tariffs as high as those announced by the U.S.” he says.

Read More: Why Economists Are Horrified by Trump’s Tariff Math

Is the U.S. at risk of a recession? Here’s what economists are saying

According to Tintelnot, recession indicators have risen as the impact of Trump’s tariffs take hold.

On Thursday, Dow Jones plunged 1,700 points, the broader S&P 500 index was 4% lower, and the tech-heavy Nasdaq sank almost 6%.

Bethune says Americans are already concerned about a possible U.S. recession, pointing to the drop in consumer sentiment seen over the past couple of months. In March, a University of Michigan survey showed a significant drop in consumer sentiment as respondents cited tariff whiplash and policy uncertainty. 

“[Consumers] are not even going to the grocery store and paying more for vegetables because there's none available from Mexico, or going to Whole Foods, for example, and finding the big sections of fresh fruit are being shut down. They haven't really felt the full impact [yet], and they're already saying something isn't right,” Bethune says.

However, while some economists, including Tintelnot, are more cautious in their discussion about a possible recession, Bethune says it’s “inevitable.” The question, he says, is just how long until it happens and for how long will it occur? He sees Trump’s admission of there being “some pain” on the horizon as only proof of the inevitability.

“At least they [the Trump Administration] are not pretending that it's not disruptive, but they’re basically soft-selling it, reflecting their ignorance about the way business operates,” Bethune claims.

Read More: What Are Tariffs and Why Is Trump In Favor of Them?

What has Trump said about the tariffs and mounting recession fears?

On Thursday, as markets dipped, Trump told reporters that “it’s going very well.”

“The markets are going to boom. The stock is going to boom. The country is going to boom,” Trump said as he left the White House.

Trump had previously addressed recession fears in the lead-up to the April 2 tariffs.After signing his memorandum announcing the reciprocal tariffs on Feb. 13, Trump spoke to reporters and said that prices “could go up somewhat” at first, but then “prices will also go down.” 

Since then, Trump has expressed the same sentiment—stating there could be “some pain” felt by consumers, but in the end it will be worth the trouble, and he believes our economy will ultimately benefit from the tariffs.

“I hate to predict things like that,” Trump said when asked if he is expecting a recession this year, during an interview with Fox News’ Sunday Morning Futures on March 9. “There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. There are always periods of… it takes a little time. It takes a little time. But I think it should be great for us.”

During another interview on Saturday, March 29, Trump told NBC News that he “couldn’t care less” if automakers raised prices because of new moves he announced on March 26 to impose a 25% tariff on imports of automobiles and certain automobile parts. “I couldn’t care less if they raise prices, because people are going to start buying American-made cars,” Trump said in response to a Wall Street Journal report that stated Trump held a call in March with automaker CEOs and threatened them with even higher tariffs if they raise prices because of the import taxes. Trump denied making such a threat. Doubling down that he “couldn’t care less,” Trump added: “If the prices on foreign cars go up, they’re going to buy American cars.”

On April 2, ahead of Trump unveiling his tariffs, the White House posted an article titled “Tariffs Work—and President Trump’s First Term Proves It,” pointing to tariffs in his first term as evidence that these new tariffs will stimulate the economy.

“Despite the rhetoric from politicians and the media, studies have repeatedly shown tariffs are an effective tool for achieving economic and strategic objectives—just as they did in President Trump’s first term,” the article reads. 

Tintelnot says, though, that these tariff announcements are unlike other tariffs in the past, pointing to how the U.S. dollar has now fallen “substantially against the Euro.”

“I think what this is indicative of is that there's just a flight of capital and assets outside away from the U.S. in response to this policy announcement,” Tintelnot says, adding that the tariffs