The latest consumer survey by The Conference Board has revealed heightened economic anxiety, with the share of respondents expecting a recession in the coming year reaching a nine-month high in February. This apprehension coincides with President Donald Trump's announcement of a 25% tariff on goods from neighboring countries Mexico and Canada. The tariffs, set to take effect on April 2, have sparked concerns about their potential impact on the economy.
Kevin Hassett, an advisor to Trump, clarified the rationale behind these tariffs, describing them as part of "a drug war, not a trade war." He claimed the tariffs aim to curb the flow of fentanyl into the United States. However, Hassett's assertion that Canada is a "major source" of fentanyl imports is disputed by data indicating Canada accounts for only 0.2% of illegal imports of the drug into the U.S.
"What happened was that we launched a drug war, not a trade war, and it was part of the negotiation to get Canada and Mexico to stop shipping fentanyl across our borders, and as we’ve watched them make progress on the drug war, then we’ve relaxed some of the tariffs that we put on them because they’re making progress." – Kevin Hassett
President Trump has indicated that tariffs on goods from Canada and Mexico could increase, though he recently paused tariffs on goods covered by the USMCA free trade treaty until April. This decision follows Mexico's President Claudia Sheinbaum's choice to hold off on retaliatory tariffs after Trump announced a one-month pause on most tariffs. Meanwhile, Canadian Prime Minister Justin Trudeau has stated that Canada's retaliatory measures will remain in place.
Commerce Secretary Howard Lutnick confirmed that the tariffs scheduled for April 2 would persist until Trump feels "comfortable" with the situation. In a recent interview on Fox News' "Sunday Morning Futures With Maria Bartiromo," Trump expressed optimism about the effects of these tariffs, particularly for farmers.
"It's going to be great, ultimately, for the farmer." – Donald Trump
Despite these reassurances, economic experts remain cautious. Mark Zandi, chief economist at Moody’s, warned that if consumer confidence continues to fall over the next three months, it could have severe consequences.
"I hate to predict things like that. There is a period of transition because what we are doing is very big." – Donald Trump
Trump has downplayed the possibility of a recession in 2025, while maintaining that the current economic strategy is beneficial in the long run. However, with conflicting messages and economic indicators pointing towards uncertainty, stakeholders remain vigilant.
"It's a transition into April and after that, I'm not doing this. I told (automakers), 'Look, I'm going to do it this one time.'" – Donald Trump
