Singapore – The likelihood of the United States falling into a recession in 2025 has surged due to the tariffs it has imposed, a financial expert warned at a recent conference. Alec Kersman, managing director at Pimco, predicted a 35% probability of a recession this year, up from the 15% estimated in December 2024. Despite the potential economic downturn, Kersman remains optimistic that the U.S. economy will still grow by 1% to 1.5%, albeit at a slower rate than previously expected.
At the same conference, Kamal Bhatia, president of Principal Asset Management, shared a different perspective. Bhatia suggested that the increase in domestic consumption resulting from the tariffs could actually boost the U.S. economy beyond projections. He highlighted the possibility of a more patriotic approach to spending, with individuals supporting local businesses over international trade.
The ongoing trade tensions could lead to a more insular approach among countries, according to Bhatia. This shift in attitude may prompt a surge in domestic spending, which in turn could have a positive effect on the country’s gross domestic product. Bhatia emphasized that consumer spending plays a crucial role in driving economic growth, accounting for a significant portion of the U.S. GDP.
As global politics continue to influence economies and markets, Bhatia pointed out the importance of considering these factors in financial decision-making. With tariffs reshaping international trade relations, investors are facing a new era of uncertainty and volatility. Bhatia stressed the need for a more nuanced understanding of the interconnectedness of politics, economics, and market forces.
In response to recent tariff escalations, U.S. President Donald Trump announced plans to increase tariffs on Canadian steel and aluminum. However, following negotiations with Ontario Premier Doug Ford, Trump decided to backtrack on the tariff hike. This back-and-forth exchange highlights the complexities of international trade relations and the impact of political decisions on economic outcomes.
Overall, the uncertain landscape of global trade is reshaping how countries approach economic policies and market strategies. The interplay between tariffs, geopolitics, and consumer behavior creates a dynamic environment that requires adaptability and foresight from businesses and investors alike. Navigating these challenges will be crucial in determining the future trajectory of the U.S. economy and global markets.