According to Apollo chief economist Torsten Slok, if President Donald Trump were aiming to engineer a recession by summer, one of the most effective methods would be to announce sweeping “Liberation Day” tariffs in April. In a new 40-page report, Slok outlines the possibility of a trade-induced recession, which he now places at a 90% probability.
Trade War and Tariffs Set to Halt Economic Activity
Slok, who was correctly bullish in 2022 when many other analysts were forecasting a recession, now provides a warning that the flow of container ships from China to the U.S. is likely to come to a halt in the coming weeks. By mid-May, Slok predicts that punitive tariffs on Chinese imports will grind U.S. trade to a standstill. By the end of May, trucking demand will also slump, leading to layoffs in both trucking and retail sectors by late May or early June.
Corporate Sentiment and Economic Slowdown
U.S. firms are already revising down their profit expectations, placing fewer orders, and investing less in new equipment. March’s heavy truck sales were at their lowest since the pandemic, and CEO confidence is now at its lowest point since the global financial crisis of 2009. Consumer confidence has also taken a sharp decline, with many Americans expressing significant concerns about job losses. Slok notes that Americans are now expecting unemployment rates to exceed even pandemic levels, with a record-high number expecting economic conditions to worsen in the coming year.
Stagflation Likely Amid Ongoing Trade War
Slok describes the ongoing trade war as a stagflation shock—where inflation persists alongside stagnating growth and high unemployment. With the U.S.-China trade conflict continuing to escalate, Slok warns that stagflation seems highly likely in the near future, further exacerbating economic pressures.
The report underscores the mounting risks posed by escalating trade tensions, with the potential for widespread economic disruptions, layoffs, and bankruptcies, especially in well-run generational retailers who may struggle to survive the downturn. As the tariffs take hold and international trade slows, Slok predicts that the U.S. economy will experience a recession, starting with a contraction in May or June.