Is US heading towards recession? Amid new trade war, key indicators flash warning signs

As Federal Open Market Committee convenes for its second monetary policy meeting of this year, focus will be on what US Fed Chair Jerome Powell says about the future outlook of the US economy. With tariffs becoming topic du jour, several reports and data shows that the US economy may be heading towards a recession. Federal layoffs, funding cut and immigration curbs are adding to the chaos. So, will the American economy skirt the recessionary pressure, or will Donald Trump’s erratic trade policies tank the economy? Even as economists and other nations debate over the fate of US economy and the likely impact, here are key factors that show what’s weighing down the economy:

Economic uncertainty worsens: When Trump began his second stint in the Oval Office, people were hopeful for radical reforms. From deregulation to tax cuts, sectoral voices backed Trump as they felt that these steps will spur more investments and new wave of hiring. US Treasury Secretary Scott Bessent called it a ‘detox period.’ In an interview on NBC's 'Meet the Press,' Bessent had said that there are "no guarantees" the US can avoid a recession. But 60 days into the presidency, the situation remains unclear. A Wall Street Journal report says that many industry captains feel that speculations are rife whether these somewhat erratic policy decisions will seriously help the economy or not. The WSJ report said that while ‘soft landing’ was a buzzword till last year, scenario has changed dramatically in 2025. Fewer people are talking about this process of overheated economy cooling down with plunging into recession.

Top bosses are less optimistic now: The corporate America is growing less and less enthusiastic about Republican leadership with every passing day. While there has been no vocal criticism of Trump presidency so far, the WSJ report says that a recent poll conducted on March 4 showed business confidence tanking to lowest levels since 2012.

Tariffs rule the airwaves: Much like rest of the world, Americans are also concerned about the impact of tariffs. The Wall Street journal reports said tariff was the main talking point in nearly 700 earning calls. So, even though the full picture of all major indicators is yet to come, factors such as ‘policy uncertainty index’ show a bleak mood. With the deadline for reciprocal tariffs nearing, anxiety is bound to grow among investors and general public. A Bloomberg report recently showed growing signs of intense trade war as China halting US LNG imports. Last month, Trump had announced a metal tariff. From Canada to China to European Union, every major economy has vowed retaliation against the US that has further spooked markets.

Consumers panic, labour market worried: The federal layoffs are just the tip of the proverbial iceberg. The sentiment in the overall job market remains muted. While the unemployment rate of 4.1 percent is in within agreeable range by any yardstick, problem is about the future hiring. With Elon Musk-led Department of Government Efficiency enabling more federal layoffs, most people are insecure about their jobs being on line.