A top White House economic adviser pushed back against talk of a U.S. recession amid uncertainty on tariffs and U.S. stock indexes dropping on Monday.
In an interview with CNBC, Kevin Hassett, who leads the White House’s National Economic Council, said there were many reasons to be bullish about the economy despite predictions of a downturn.
“For sure, there is some uncertainty over exactly how the trade policy will work itself out,” Hassett conceded on Monday.
The Atlanta Federal Reserve’s closely followed GDP Now tracker suggests the economy could contract in the first three months of the year, largely due to an outsized drag from net trade.
Hassett, however, said that it would be a “very temporary phenomenon,” driven largely by a historical tendency to hold off on investment after a big election. This tendency should be resolved this month, and tariff uncertainty should be resolved in April, he said.
The United States, he added, would likely “squeak into the positive category” during the first quarter of 2025, adding that the “second quarter is going to take off as everybody sees the reality of the tax cuts.”
“Just be very wary ... of conversations about recession,” Hassett also said, rejecting the notion that consumers would bear the brunt of tariffs proposed and implemented.
Trade comprised only “a fraction” of the U.S. economy, he said, and even if there was a small change in the price of imported goods, real wages were expected to go up as manufacturing employment rose.
By Monday afternoon, the Dow Jones Industrial Average dropped about 900 points before it trended upward later in the day. The Nasdaq composite was down more than 4.2 percent on Monday.
Trump imposed 20 percent tariffs on Chinese goods entering the United States along with 25 percent tariffs on a swath of imports from Mexico and Canada. He suspended a number of duties on the two neighboring countries until next month when he is scheduled to unveil a broader tariff regime.
The president has argued that tariffs against Mexico and Canada are needed to reduce illegal immigration and drug trafficking. The Chinese tariffs were issued in a bid to prevent the production of fentanyl precursor chemicals, according to the White House.
On Monday, Ontario Premier Doug Ford announced a 25 percent increase in electricity prices for 1.5 million American homes and businesses in response to the U.S. tariffs. Ontario provides electricity to New York, Wisconsin, and Michigan.
“I will not hesitate to increase this charge. If the United States escalates, I will not hesitate to shut the electricity off completely,” Ford said at a news conference in Toronto. “Believe me when I say I do not want to do this. I feel terrible for the American people who didn’t start this trade war.”
