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Former Senator Toomey (Politico):

“We have a recession coming. That’s what the response would be from a full-blown trade war that [Trump] would precipitate,” Toomey said, referring to the president-elect’s trade proposals. Those include tariffs of up to 20 percent on all imports, tariffs of at least 60 percent on China and more radical positions such as swapping the income tax with tariffs.

The October WSJ mean forecast was for 1.92 ppts growth in 2025 (q4/q4). McKibben-Hogan-Noland (2024) placed the impact of 10% overall tariffs and 60% tariffs on Chinese imports as about -0.12 ppts deviation from trend and +0.02 ppts deviation from trend, respectively, in the no retaliation scenario in 2025; -0.35 ppts and -0.08 ppts respectively in the with-retaliation scenario. This means output would roughly drop by about 0.43 ppts relative to baseline, so no recession in 2025. However, in 2026, the combination with-retaliation scenario implies 1.3 ppts reduction relative to baseline. Goldman Sachs has y/y growth by end-2025 as about 0.55 ppts below baseline, assuming partial imposition of Trump proposed tariffs.

Note that the McKibben-Hogan-Noland calculations don’t explicitly take into account a rise in economic policy uncertainty, such as the one that occurred in the last trade war. To the extent that uncertainty deters investment, one might very well get pushed into recession territory.

Adding forced deportations to a trade war might make the numbers add up to a recession in 2025.

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