Will tariffs lead to a recession?

The Trump administration's tariff moves are turning US trade policy on its head and fueling concerns about The US economic outlook. So will tariffs send The US into a recession? And if so, what might that recession look like? I'm Alison Nathan, and this is Goldman Sachs exchanges. Each month I speak with investors, policy makers, and academics about the most pressing market moving issues for our top of my report from Goldman Sachs research. I recently spoke with Paul Krugman, Jan Hatzius, and Oren Cass about what the radical shift in tariff policy could mean for The US economy. I started off b

has been nothing like this. The story keeps changing, but it looks like we're looking at an average tariff rate that is a little bit higher than the Smoot Hawley tariff of 1930. But Smoot Hawley was starting off a base of quite high tariff rates. So the actual increase in Smoot Hawley was a few percentage points on the average tariff rate. Here, we're leaping from something like 3% average tariff to something like 20 or more average tariff, which is vastly bigger than Smoot Hawley, and trade is about three times as big a share of The US economy as it was in 1930. So this is quite literally peo

obviously, this tremendous trade shock has raised concern about recession in The US, maybe even beyond, but certainly in The US. Where do you stand on that? Is recession most likely ahead? Is it even inevitable at this point given the uncertainty? Well okay.

My track record at predicting recessions is terrible, but no worse than anybody else's. I mean, there have been studies. The success rate of economists are predicting recessions is approximately zero. And, you know, that said, this does look like a recession. But what's funny about it is that if you asked me, do tariffs normally cause recessions, the answer would be no. A tariff means that people buy less of imported goods, but they might buy more of domestic goods, and it's not clear why that should lead to a recession. It has unpleasant consequences. It raises the cost of living. It reduces

assume, well, because it's so self inflicted, the antidote is very obvious. You know, we just reversed policy. If we saw a quick reversal of policy, is that the answer here and then growth can rebound? No.

In some ways, I almost think that the policy reversals to the extent they happen may in some ways, they make it worse because the reversal may be reversed a day or a week or a month later. So it doesn't make investing any easier because you still have no idea what the world will look like by the time your investment matures. At

this point, can you conceive of anything that would convince markets and consumers that the uncertainty is behind us? Is there anything that would restore confidence from that perspective? It's hard because

the thing about trade policy in particular is that the way it's set up in The United States, the law gives the president enormous discretion. No legislation has to be passed. No commitments need to be made, which means that he can change his mind overnight. And we set up that system to create some flexibility, basically pressure release vowels around tariffs that were negotiated with other countries. We needed something that would let The United States respond if the political pressures became too great, but it was never intended to be used to make massive changes in trade policy. But that's w

if we are talking about a likely recessionary scenario, will it be mild? Will it be deep? What is your best guess in terms of what this recession will actually look like?