| The basics of the U.S. economy are strong right now, but underneath it are worrying signs that President Donald Trump’s tariffs could lead to a recession, economists warn, as the levies are about to hit businesses and the supply chain in a way that is likely to raise prices for Americans. “We’re starting to see the effects of tariffs already,” said Diane Swonk, chief economist with the global accounting firm KPMG. “There has already been panic buying or holding off on buying until these tariffs go away.” This month, Trump paused high tariffs on dozens of countries for 90 days. But he left in place a blanket 10 percent duty on any good coming into the United States. That means everything Americans buy, from tomatoes to electronics, could get more expensive in the coming months as businesses are forced to raise prices. Even before that happens, Michael Strain — an economist with the conservative-leaning American Enterprise Institute — said there are signs now that mirror the beginning of the 2008 financial crisis. And this week, the International Monetary Fund warned Trump’s tariffs will drag down global economic growth. “I think this looks like the kind of thing you’d normally see in a developing country,” Strain said. “Where investors might be saying, ‘We just don’t want anything to do with the United States.’ And that’s troubling.” Both economists said they are watching two indicators closely to try to tell if a recession is coming. 1. What does Trump do? Trump’s tariffs injected major uncertainty into a humming economy, shocking even some of his wealthy supporters. “It’s insane,” Strain said. “This is an enormous self-inflicted wound on the economy, and to see our government do this to American businesses and households is something I never thought I would see.” But economists that also means a single decision by the president could help move the country away from the brink. “If we see a major course correction by Trump, that could help avert a recession,” said Swonk, with KPMG. Trump says his administration is negotiating trade deals with more than a dozen countries to lower or avoid instituting even higher tariffs. “These countries are calling us up, kissing my ass,” he said this month. “They are dying to make a deal.” But trade deals traditionally take time, and the Trump administration has repeatedly said it won’t reduce sky-high, 145 percent tariffs on Chinese imports until it has negotiated one. Meanwhile, trade is virtually halted between the world’s two largest economies, reports The Washington Post’s David J. Lynch. The economists I’ve talked to say it was good that Trump pulled back on some tariffs after seeing economic warning signs, but they worry he won’t get rid of all the levies. Swonk said he seems pretty dug in on tariffs as a way to pay for his tax cuts. “Now we’re going to be making money with everyone,” Trump told reporters Wednesday, repeating an exaggerated claim that tariffs will bring in billions in revenue a day, “and everyone’s going to be happy.” The markets also didn’t like it when Trump this week criticized the Federal Reserve chairman, who leads the independent central bank that helps set interest rates. There was speculation the president would fire him, leading to more economic uncertainty. Trump’s aides urged him to back off, The Post reported. 2. When do businesses and consumers start spending less? If consumers haven’t yet seen higher prices on goods, that’s because many companies stockpiled products before tariffs went into effect, Swonk said. But things could get more expensive by summer, and tariffs are particularly costly for American businesses, which often rely on parts from around the world to make their products. The car industry is a good example: Trump’s auto tariffs will cost automakers $108 billion more this year, according to one estimate. Ford recently said it may raise prices if the tariffs continue, and Stellantis has temporarily laid off hundreds of workers. “You’re going to see higher prices and a weaker labor market and a big hit to business investment spending,” Strain predicted. “And then things will continue to get worse.” Swonk warned that the longer this goes on, it could disrupt supply chains, and Americans could even see empty store shelves. She said U.S. businesses might have to lay off workers. That could lead to a nasty economic phenomenon known as stagflation: job losses combined with inflation. “Every company I talk to,” Swonk said, “they just don’t know which scenario we’ll see. The uncertainty is its own tax on the economy, and it’s showing up, ahead of the tariffs even landing.” | 
