Trump’s Tariff Strategy Raises Recession Fears—but Aims to Avoid a Depression

As global markets brace for uncertainty, recent revelations suggest that  U.S. President Donald Trump was not unaware of the economic risks tied to his sweeping tariff policies.

According to a report by The Wall Street Journal, Trump privately admitted that his aggressive tariffs could spark a recession—but stressed that he sought to avoid something far worse: a depression.

Recession Acknowledged, Depression Avoided

In closed-door discussions with close advisors, Trump acknowledged the economic “pain” his protectionist measures might inflict. Aides quoted in the WSJ confirmed that he accepted the possibility of a short-term recession, provided it wouldn’t spiral into a catastrophic depression.

“He was aware of the pain but believed that the long-term benefits of trade renegotiation would outweigh the short-term costs,” a source familiar with the matter shared.

A depression, as defined by economists, is a sustained, long-term downturn in economic activity marked by skyrocketing unemployment and widespread financial collapse. The last instance was the Great Depression of the 1930s, during which unemployment in the U.S. soared to 25%. Since then, various stabilizing tools like monetary policy, fiscal stimulus, and FDIC insurance have helped the U.S. avert such economic catastrophes.

Stock Markets See Turbulence, Bonds Send Warning

Trump’s announcement of country-specific tariff rollbacks on Wednesday came after several days of severe market selloffs. The S&P 500 rebounded strongly—its best day since 2008—after facing a brutal downturn that had shaken investor confidence.

Bond markets, typically a leading indicator of investor sentiment, also flashed warning signs. On the eve of Trump’s tariff pullback, the yield on the 10-year U.S. Treasury note spiked above 4.5%, driven by fears that major foreign bondholders—possibly China or Japan—were dumping U.S. debt.

“The Treasury market sent a strong signal,” said Kevin Hassett, then-director of the National Economic Council, in a CNBC interview. “That added urgency to a decision that was already under consideration.”

Timeline of Economic Reactions

Rising Influence of Trade Advisors

Behind Trump’s sudden change in stance is the increasing influence of Treasury Secretary Scott Bessent, who has reportedly taken a more hands-on role in trade policy discussions. According to WSJ sources, Bessent advocated for measured adjustments in tariffs to stabilize financial markets and allow for negotiations with allied nations.

“A growing number of countries were entering trade talks, which gave the President more reason to moderate,” said an insider quoted by The Wall Street Journal.

“A Little Bit Yippy”

Trump himself responded to market anxiety during a press appearance, saying:

“I thought that people were jumping a little bit out of line. They were getting a little bit yippy, a little bit afraid.”

While the White House did not comment on WSJ’s report, Trump’s remarks signaled he was closely watching the markets and investor reactions—even as he pushed forward with bold economic maneuvers.

Broader Implications

Trump’s tariff strategy continues to divide opinion. Supporters argue it is a necessary recalibration of decades of unbalanced trade, particularly with China. Critics, however, warn of escalating global tension and rising consumer costs.

For reference:

• Historical Analysis of the Great Depression — Federal Reserve History

• What Are Economic Depressions? — International Monetary Fund

Conclusion

Trump’s tariff rollback was a nod to market realities and a subtle admission that his approach carried real economic risks. While avoiding a depression was top of mind, the policy still teeters on the edge of a self-induced recession. As negotiations continue and markets remain volatile, business leaders and global allies are watching the White House for its next move.

Also read: China Strikes Back: 34% Tariff on All U.S. Imports Amid Escalating Trade War