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Tariffs are fueling fears of a recession. What does it take to actually declare one?
Employees in the trading room of Nordea Markets follow Monday’s sharp stock market declines in Oslo. The Trump administration’s tariffs are fueling concerns about the prospect of a recession, in the U.S. and globally.
Ole Berg-Rusten/NTB/AFP via Getty Images
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Ole Berg-Rusten/NTB/AFP via Getty Images
The Trump administration’s new tariffs on imported goods from countries around the world have rattled consumers, stoked a trade war, roiled global markets and fueled widespread concerns about the prospect of a recession, both in the U.S. and globally.
In the days since President Trump announced the sweeping baseline and “reciprocal” tariffs, Google searches for the term “recession” have surged and economists at prominent investment banks have pointed to increased odds of a recession occurring.
In a Sunday note to clients, Goldman Sachs raised the probability of a U.S. recession from 35% to 45% — and that’s assuming the tariffs are rolled back. If the country-specific tariffs take effect Wednesday as intended, the firm says, “we would revise our forecast to include a recession.”
In a research report last week titled “There Will Be Blood,” JP Morgan upped its risk of a global recession to 60% from 40% before the tariff announcement.
Its CEO Jamie Dimon doubled down on Monday, writing in his annual letter to investors that the tariffs “will likely increase inflation” and are prompting “many to consider a greater probability of a recession.”
“Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth,” Dimon wrote.
There are growing calls for Trump to delay or reduce the tariffs coming from Wall Street, Capitol Hill and around the world. Administration officials said Sunday that more than 50 countries have reached out to begin negotiations — but have also said the tariffs will not be postponed.
In an interview with NBC’s “Meet the Press” on Sunday, Treasury Secretary Scott Bessent downplayed concerns about a recession, saying, “We’re going to hold the course.” Pointing to March’s better-than-expected jobs report, he said he sees “no reason that we have to price in a recession.”
“There doesn’t have to be a recession,” he added. “Who knows how the market is going to react in a day, in a week. What we are looking at is building the long-term economic fundamentals for prosperity.”
With all this talk about a potential recession, it’s worth taking a look at what the term actually means — and who decides when it applies.
What is a recession?
A recession refers to a period of decline in economic activity. It’s one of the four stages of the economic cycle: growth, peak, contraction (or recession) and trough.
Some analysts use a rough rule of thumb to identify recessions: Two consecutive quarters of decline in a nation’s gross domestic product (GDP) — the broadest measure of economic activity.
But the National Bureau of Economic Research (NBER) — the nonpartisan, nonprofit research organization that has become the semi-official arbiter of recessions — uses a somewhat squishier definition. It calls a recession a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
Who declares a recession?
The job of documenting the economic cycles, including recessions, does not fall to the federal government.
Instead, the NBER’s Business Cycle Dating Committee — made up of top American economists — has been declaring the beginning and end of the cycles since its creation in 1978 (NBER itself is decades older).
There is no fixed rule about how long NBER takes to identify a recession after a decline has started. It says on its website that past determinations have taken anywhere from four to 21 months.
“We wait long enough so that the existence of a peak or trough is not in doubt, and until we can assign an accurate peak or trough date,” NBER says.
For example, it announced in June 2020 that the U.S. had officially entered a pandemic-induced recession months earlier, in February. It announced over a year later that the 2020 recession had ended in April after just two months, making it the shortest U.S. recession on record.
What happens in a recession?
A shrinking economy can cause a cascade of stressful ripple effects, including lower employment, deteriorating stock market results and higher borrowing costs for consumers and companies, according to Fidelity.
For example, people may not want to spend as much, which can impact the businesses they would otherwise support, which can lead to layoffs and in turn harm companies’ performance in the stock market — further fueling the cycle.
Mark Zandi, chief economist at Moody’s Analytics, told NPR last week that consumer confidence and discretionary spending were already on the decline. He said the possibility of even broader tariffs — which were announced the following day — could speed up the path to a recession.
“It’s the consumer that’s feeling the brunt of it first, and with good reason,” he said. “But … the way you get to recession is businesses see the weakening in their sales, and if they start laying off workers, then we’re done. We’re going into a recession.”
How rare are recessions?
Various factors can jolt the economy into a recession, from unexpected events (like pandemics and wars) to asset bubbles bursting to excessive inflation or deflation.
The U.S. has experienced 34 recessions since 1857, according to NBER data.
They varied considerably in length, from two months (2020) to over five years (The Panic of 1873, which triggered the “Long Depression”).
Since World War II, the average length of a recession has been 11.1 months, according to the business publication Kiplinger. The post-WWII U.S. has averaged a recession every 6.5 years, it adds.
The longest post-WWII recession was the Great Recession, which spanned 18 months from December 2007 to June 2009 and was triggered when the U.S. housing bubble burst. The most recent was the brief COVID-19 recession in 2020. While the economy experienced two quarters of negative GDP growth in early 2022, fueling fears of a recession, NBER did not declare one.
Depressions are much more severe and rare: Merriam-Webster says they are characterized by widespread unemployment and major pauses in economic activity. NBER does not specifically identify depressions, but says the U.S. is generally regarded to have last experienced one in the 1930s.
Just two weeks ago, President Trump threatened to wipe out Iran’s civilization if it did not open the Strait of Hormuz. Days later, he said any Iranian “who fires at us, or at peaceful vessels, will be BLOWN TO HELL!”
Yet on Wednesday, after Iran seized two ships near the Strait of Hormuz, the White House was quick to argue the action was not a deal breaker for potential peace negotiations.
“These were not U.S. ships,” Karoline Leavitt, the White House press secretary, said on Fox News. “These were not Israeli ships.” Therefore, she explained, the Iranians had not violated a cease-fire with the United States that Mr. Trump has extended indefinitely.
She cautioned the news media against “blowing this out of proportion.”
The surprisingly tolerant tone from the White House suggests Mr. Trump is not eager to reignite a war that he started alongside Israel on Feb. 28 — a war that has proved unpopular with Americans and has gone on longer than he initially estimated.
The president on Tuesday extended a cease-fire between the United States and Iran that had been set to expire within hours, saying he wanted to give Tehran a chance to come up with a new proposal to end the war.
The American military has displayed its overwhelming might during the war, successfully striking thousands of targets. But it remains unclear whether Mr. Trump will accomplish the political objectives of the war.
The Iranian regime, even after its top leaders were killed, is still intact. Iran has not agreed to Mr. Trump’s demands to turn over its nuclear capabilities to the United States or significantly curtail them. And the Strait of Hormuz, a key passageway for world commerce that was open before the war, remains closed.
Nevertheless, the White House has repeatedly highlighted the military successes on the battlefield as evidence it is winning the war.
“We have completely confused and obliterated their regime,” Ms. Leavitt said on Fox Wednesday. “They are in a very weak position thanks to the actions taken by President Trump and our great United States armed forces, and so we will continue this important mission on our own.”
The oscillation between threats and a more conciliatory tone has long been one of Mr. Trump’s signature negotiating strategies.
Potential peace talks between the two countries are on hold. Vice President JD Vance had been poised to fly to Islamabad for negotiations. But the trip was postponed until Iran can “come up with a unified proposal,” Mr. Trump said.
The United States recently transmitted a written proposal to the Iranians intended to establish base-line points of agreement that could frame more detailed negotiations. The document covers a broad range of issues, but the core sticking points are the same ones that have bedeviled Western negotiators for more than a decade: the scope of Iran’s uranium enrichment program and the fate of its stockpile of enriched uranium.
Mr. Trump has not spoken publicly about the cease-fire, other than on social media. On Wednesday, he also posted about topics including “my Apprentice Juggernaut” — a reference to his former television show; the Virginia elections, which he called “rigged”; and a new book about Supreme Court Justice Samuel A. Alito Jr.
Secretary of the Navy John Phelan speaks, as President Trump listens, at Trump’s Mar-a-Lago club on Dec. 22 in Palm Beach, Fla.
Alex Brandon/AP
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Alex Brandon/AP
WASHINGTON — Navy Secretary John Phelan is leaving his job, the Pentagon abruptly announced Wednesday, the first head of a military service to depart during President Trump’s second term but just the latest top defense leader to step down or be ousted.
No reason was given for the unexpected departure of the Navy’s top civilian official, coming as the sea service has imposed a blockade of Iranian ports and is targeting ships linked to Tehran around the world during a tenuous ceasefire in the war. Another Trump loyalist is taking over as acting head of the Navy: Undersecretary Hung Cao, a 25-year Navy combat veteran who ran unsuccessful campaigns for the U.S. Senate and House in Virginia.
Phelan’s departure is the latest in a series of shakeups of top leadership at the Pentagon, coming just weeks after Defense Secretary Pete Hegseth fired the Army’s top uniformed officer, Gen. Randy George. Hegseth also has fired several other top generals, admirals and defense leaders since taking office last year.
The firings began in February 2025, when Hegseth removed military leaders, including Adm. Lisa Franchetti, the Navy’s top uniformed officer, and Gen. Jim Slife, the No. 2 leader at the Air Force. Trump also fired Gen. Charles “CQ” Brown Jr. as chairman of the Joint Chiefs of Staff.
Showing how sudden the latest move was, Phelan had addressed a large crowd of sailors and industry professionals on Tuesday at the Navy’s annual conference in Washington and spoke with reporters about his agenda. He also hosted the leaders of the House Armed Services Committee to discuss the Navy’s budget request and efforts to build more ships, according to a social media post from his office.
Pentagon spokesman Sean Parnell said in a post on X that Phelan was “departing the administration, effective immediately.”
Phelan had been a major Trump donor
Phelan had not served in the military or had a civilian leadership role in the service before Trump nominated him for secretary in late 2024. He was seen as an outsider being brought in to shake up the Navy.
Hung Cao speaks during the Republican National Convention on July 16, 2024, in Milwaukee.
Matt Rourke/AP
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Matt Rourke/AP
Phelan was a major donor to Trump’s campaign and had founded the private investment firm Rugger Management LLC. According to his biography, Phelan’s primary exposure to the military came from an advisory position he held on the Spirit of America, a nonprofit that supported the defense of Ukraine and the defense of Taiwan.
The Associated Press could not immediately reach Phelan’s office for comment. The White House did not answer questions and instead responded by sending a link to Parnell’s statement.
Phelan is leaving during a busy time for the Navy. It has three aircraft carriers deployed in or heading to the Middle East, while the Trump administration says all the armed forces are poised to resume combat operations against Iran should the ceasefire expire.
The Navy also has maintained a heavy presence in the Caribbean, where it has been part of a campaign of strikes against alleged drug boats. It also played a major role in the capture of Venezuelan leader Nicolás Maduro in January.
New acting Navy secretary ran unsuccessful bids for Congress
Taking over as acting secretary is Cao, who ran a failed U.S. Senate bid in Virginia to try to unseat Democratic Sen. Tim Kaine in 2024. He had Trump’s endorsement in the crowded Republican primary and gave a speech at the 2024 Republican National Convention.
Cao’s biography includes fleeing Vietnam with his family as a child in the 1970s. In a campaign video for his Senate bid, he compared Vietnam’s communist regime during the Cold War to the administration of Democratic President Joe Biden.
During his one debate with Kaine, Cao criticized COVID-19 vaccine mandates for service members as well as the military’s diversity, equity and inclusion efforts.
“When you’re using a drag queen to recruit for the Navy, that’s not the people we want,” Cao said from the debate stage. “What we need is alpha males and alpha females who are going to rip out their own guts, eat them and ask for seconds. Those are the young men and women that are going to win wars.”
Trump and Hegseth have railed against DEI in the military, banning the efforts and firing people accused of supporting such programs.
When he ran for Congress in Virginia in 2022, Cao expressed opposition to aid for Ukraine during a debate against his Democratic opponent.
“My heart goes out to the Ukrainian people. … But right now we’re borrowing $55 billion from China to pay for the war in Ukraine. Not only that, we’re depleting our national strategic reserves,” Cao said.
Cao graduated from the prestigious Thomas Jefferson High School for Science and Technology in Alexandria, Virginia, before attending the U.S. Naval Academy.
He was commissioned as a special operations officer and went on to serve with SEAL teams and special forces in Iraq, Afghanistan and Somalia before retiring at the rank of captain, according to his Senate campaign biography.
Cao also earned a master’s degree in physics and had fellowships at the Massachusetts Institute of Technology and Harvard University.
Since becoming Navy undersecretary, Cao has championed returning to duty service members that refused a Biden-era mandate to take the COVID-19 vaccine.
Candidates in California’s volatile race for governor will meet Wednesday night for the first televised debate since Eric Swalwell dropped out, each looking to seize momentum in the tight contest.
The debate, being held at the television studio of KRON4 in San Francisco, will include four Democrats and two Republicans who are tightly bunched in recent polls, with many voters still undecided less than six weeks before the June 2 primary.
Mr. Swalwell, a Democrat, had just begun to emerge as a Democratic front-runner when his campaign swiftly collapsed after he was accused of sexual assault in news reports on April 10.
Candidates have taken relatively few risks so far in debates around the state, but every candidate is now eyeing a chance to jump to the front of the pack.
“Even though we have seen some movement in the last couple of weeks, it continues to be a fairly crowded, fractured field,” said Sara Sadhwani, an assistant professor of politics at Pomona College. “So candidates need to be able to grab attention in a debate like this.”
The debate comes as Xavier Becerra, a Democrat and former California attorney general, has enjoyed a surge of support in polls since Mr. Swalwell dropped out of the race.
Mr. Becerra and Matt Mahan, the mayor of San Jose, did not originally meet the threshold to participate in Wednesday’s debate when Mr. Swalwell was running. But they both qualified after receiving enough support in a follow-up poll that debate organizers commissioned once Mr. Swalwell had dropped out.
The other Democrats scheduled to participate are Tom Steyer, a former hedge fund manager, and Katie Porter, a former congresswoman, each of whom have been polling near the top of the Democratic field for several weeks. The Republicans in the debate are Steve Hilton, a former Fox News host who has been endorsed by President Trump, and Chad Bianco, the sheriff of Riverside County.
All candidates run on the same ballot in California’s nonpartisan primary, with the two who receive the most votes advancing to the general election, regardless of their party affiliation. The large number of Democratic candidates has created fear among state party leaders that their voters could splinter, potentially allowing two Republicans to sweep the primary in this heavily Democratic state.
The odds of that happening have decreased since Mr. Swalwell dropped out and another Democrat, Betty Yee, withdrew on Monday. But Rusty Hicks, the chairman of the California Democratic Party, still believes there are too many Democrats in the race and has urged those lagging in polls to end their campaigns. (The actual ballot will include 61 candidates for governor, most of whom are completely unknown to voters.)
The messy race to succeed Gov. Gavin Newsom, who cannot run for re-election because of term limits, has played out as the most unpredictable contest California has seen in a generation. It has attracted a sprawling field but no one with the star power of former Gov. Arnold Schwarzenegger or the political might of Mr. Newsom or former Gov. Jerry Brown.
Much of California’s Democratic establishment is still figuring out whom to back in the turbulent race.
Mr. Newsom has not endorsed anyone, saying he trusts voters to elect someone “who reflects the values and direction Californians believe in.” Representative Nancy Pelosi, the influential former House speaker from San Francisco, and Senator Alex Padilla also have not announced their favorites. Senator Adam Schiff endorsed Mr. Swalwell earlier this year but quickly withdrew his support after the accusations against him were published.
On Tuesday, Ms. Yee endorsed Mr. Steyer, praising his work to fight climate change and engage young voters. Mr. Steyer has swamped his competitors with a raft of advertising by pouring $134 million from his personal fortune into his campaign.
Also on Tuesday, Mr. Becerra, whose campaign had appeared to be flailing until Mr. Swalwell dropped out, received the endorsement of Robert Rivas, the Democratic speaker of the California State Assembly. Mr. Rivas said he had encouraged Mr. Becerra to run for governor because he was impressed by his work as California’s attorney general during President Trump’s first term.
“He understands both the policy and the politics,” Mr. Rivas said in an interview. “And he has a track record, in my opinion, of delivering results under pressure.”
The 90-minute debate on Wednesday begins at 7 p.m. PT and will be broadcast and streamed by KRON and other California stations.
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