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President Donald Trump aimed to prevent a downturn in the economy through his controversial tariff strategy, as reported by The Wall Street Journal.
According to a report on Wednesday night, Trump expressed concerns that his sweeping tariff plan, introduced last week, could potentially lead the economy toward a recession — a scenario he wanted to avoid at all costs. People familiar with the discussions revealed that he was particularly mindful of the implications of such a move.
Trump also indicated he was prepared to endure economic “pain” as part of this policy, suggesting that he was aware of the risks involved, as shared by an individual who spoke with him earlier in the week.
Economists define a depression as a sustained and severe downturn in economic activity, characterized by high unemployment and long-lasting distress. The U.S. has managed to avert depressions since the Great Depression of the 1930s when unemployment skyrocketed to about 25%. This stability has been attributed to advancements in monetary and fiscal policy, along with protective measures such as deposit insurance implemented by the Federal Deposit Insurance Corporation.
While many economists were beginning to forecast a recession linked to Trump’s aggressive tariffs hampering global trade, few believed it would escalate into a depression.
In the lead-up to Trump’s announcement to reduce some of the tariffs, bond yields surged and stock prices plummeted. However, after his reversal, the stock market rebounded sharply, with the S&P 500 experiencing its most significant single-day rally since 2008.
Kevin Hassett, director of the U.S. National Economic Council, commented on CNBC that fluctuations in the bond market were influential in Trump’s decision-making process. Overnight Tuesday into Wednesday, the yield on the 10-year Treasury bond spiked over 4.5% due to speculation that major international holders, such as Japan or China, were offloading bonds – a movement inversely related to bond prices.
Hassett noted on CNBC’s “Squawk Box,” “Everything was moving forward in an orderly fashion. The turmoil in the Treasury market certainly added urgency to the decision-making process, but the shift was likely inevitable.”
After the announcement on Wednesday, Trump acknowledged investor anxieties, remarking, “I thought that people were jumping a little bit out of line. They were getting a little bit too anxious.”
The White House did not respond promptly to inquiries from CNBC regarding Trump’s apprehensions about a depression.
According to the Journal, an important factor in Trump’s policy adjustments was the growing influence of Treasury Secretary Scott Bessent on trade strategy. Additionally, the number of countries engaging in negotiations with the White House contributed to Trump’s openness to reevaluate his stance, as conveyed by a close associate of the president.
Read the full Wall Street Journal report here.
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