Although not a household name, Paul Krugman — Nobel Prize-winning economist — has issued a significant warning that is drawing increasing attention.
He believes the United States is likely heading toward a recession, citing the disruptive effects of unpredictable tariff policies implemented under President Donald Trump.
According to a detailed report by Newsweek, Krugman emphasized that the constant shifts in trade policy are creating a climate of uncertainty that weighs heavily on business and consumer confidence.
Awarded the Nobel Prize in Economic Sciences in 2008, Krugman remains a prominent voice among economists who have been critical of recent economic strategies and their potential consequences.
Krugman Highlights Tariff Volatility as a Major Threat
Speaking during an April 23 episode of a Goldman Sachs podcast, Krugman emphasized that the real threat to economic stability is not the tariffs themselves but their unpredictable application. ‘There has been nothing like this,” Krugman said, adding: “The story keeps changing.”
Krugman explained:
“A stable tariff rate would not cause a recession, but an unpredictable tariff rate that can change the next day is really a depressing effect on demand.”He further noted:
“The secret sauce of the Trump tariffs is that they are extremely uncertain. Nobody knows what they will be. Nobody knows what comes next.”
Awarded the Nobel Prize in Economic Sciences in 2008, Krugman has been a persistent critic of Trump’s economic policies, warning ahead of the 2024 election that they could lead to “economic chaos.” He pointed out that the current uncertainty is affecting business investment, consumer spending, and the housing sector.
While he does not foresee a severe recession under present conditions, he cautioned that a dramatic fall in consumer spending could significantly worsen the downturn.
Trump’s Tariff Strategy and Political Messaging
President Donald Trump has repeatedly imposed, suspended, and reimposed various tariffs, creating a volatile trade environment. Notably, after imposing sweeping retaliatory tariffs on April 9, Trump paused most of them just a few hours later.
On Truth Social, Trump defended his economic approach, posting :
“THIS IS AN ECONOMIC REVOLUTION, AND WE WILL WIN. HANG TOUGH, it won’t be easy, but the end result will be historic. We will, MAKE AMERICA GREAT AGAIN!!!”
The administration has paused dozens of tariffs for 90 days to allow time for negotiations with multiple countries. However, tariffs targeting China remain in effect amid ongoing tensions.
Growing Concern Among Economists and Financial Leaders
Other financial leaders have echoed Krugman’s concerns. Ray Dalio, founder of Bridgewater Associates, said during an NBC interview that the United States is “very close to a recession.”
He warned that mishandling the current economic and geopolitical dynamics could lead to something worse than a typical recession, comparing the current environment to the 1930s.
Similarly, Torsten Slok, an economist, stated during a Monday appearance on CNBC that there would “absolutely” be a recession in 2025 if tariffs stay at their current levels.
Scott Lincicome, vice president of general economics at the Cato Institute, noted in an interview with CNN that markets were temporarily relieved after the tariff pause but stressed ongoing instability.
“I don’t know how you could possibly think the U.S. is a sound, safe, and stable place to invest when the president is flipping tariffs on and off like a light switch,” he said.
International Reactions and Ongoing Tensions
Internationally, reactions have been firm. Lin Jian, spokesperson for the Chinese Foreign Ministry, emphasized China’s stance, saying:
“Tariff and trade wars have no winner. China does not want to fight these wars but is not scared of them… China’s response will continue to the end.”
Tensions with China remain high, with tariffs against Chinese goods still intact despite broader negotiations.
