• Experts remain unconvinced by US president’s claims of an imminent economic boom, warning that recovery from global tumult could be a long process fraught with risks
• ‘Unless there is a change in the political will to work with other countries to stabilize and lower tariffs, it is unlikely that the stock market will recover,’ says Eugene White of the National Bureau of Economic Research
• If Trump sticks to his current strategy, the US will ‘end up in a possibly severe recession,’ warns finance and business economics expert Aris Protopapadakis
• Some US sectors may benefit from temporary protection, but the overall ‘losses to US profitability will exceed the gains,’ says Willem Thorbecke of Japan’s Research Institute of Economy, Trade and Industry  

ISTANBUL 

As the US and the world grapple with the economic tumult caused by his sweeping tariffs, President Donald Trump remains adamant that his strategy will pay off.

“BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before!” he posted on social media on Wednesday, as the global trade war that has battered markets escalated with China, the EU, and other nations unveiling their countermeasures against the US.

The statement was a continuation of Trump’s stance, building on his previous assertions that “the market is going to boom, the stock is going to boom, the country is going to boom.”

Economists and market experts, however, remain unconvinced.

Speaking to Anadolu, several prominent analysts rejected the notion that the US economy or stock market is poised for a rebound, warning instead of a possible recession and widespread economic instability.

“It is hard to envision any circumstances where stock markets would ‘boom’ any time in the near future,” said Eugene White, an economics professor at Rutgers University and research associate at the National Bureau of Economic Research (NBER).

“Global supply chains have been disrupted and the cost of many inputs will spike, while immigration policy is upsetting labor markets in agriculture, manufacturing and services.”

Drawing historical parallels, White noted that after the 1929 Wall Street crash, US stock markets did not recover until the mid-1950s, when political conditions finally stabilized.

“Trump has reinforced his policy positions and his party, which controls Congress, is fearful of opposing him,” White said.

“Unless there is a change in the political will to work with other countries to stabilize and lower tariffs, it is unlikely that the stock market will recover.”

White also cited fresh data suggesting the US economy may already be on the brink of recession, saying market indices entering bear territory are “no doubt influenced by reports that first quarter GDP fell by as much as 2.5%.”

If GDP contracts for a second consecutive quarter, the US will formally be in recession, he said.

“The consequences of an abrupt recession with growing unemployment and business failures and a collapse of stock values, where 60% of American households own stock, will reverberate through the political system,” White warned.

“Long the world’s anchor of economic and political stability, the US will unsettle the economies and politics of both allies and enemies, requiring a long painful recovery,” he added.  

‘A possibly severe recession’

Aris Protopapadakis, an associate professor emeritus of finance and business economics at the USC Marshall School of Business, echoed those concerns, saying the markets may eventually stabilize, but not rebound dramatically.

“If they keep the tariffs and other countries retaliate, then there will be a bear market and a recession,” he told Anadolu.

Protopapadakis said the only path away from economic damage lies in political intervention: “If we (and the world) are lucky, Republicans who have to run for reelection will pressure Donald Trump to change course. He is fully capable of entering into negotiations with various countries, extracting something from them, declaring victory, and reversing course on tariffs.

“That is what he did in the ‘renegotiation’ of NAFTA, where nothing of note was changed.”

But if Trump sticks to his current strategy, he added, the US will “end up in a possibly severe recession.”  

‘Very rocky economic environment’

Willem Thorbecke, a senior fellow at Japan’s Research Institute of Economy, Trade and Industry (RIETI), said the outlook for corporate earnings – the key driver of stock prices – was unlikely to improve under Trump’s tariff regime.

“Stocks represent a bet on the cash flows of companies, and they will ‘boom’ if the outlook for future earnings improves,” Thorbecke explained.

“I do not think tariffs will improve the outlook for future earnings. They favor inefficient producers, and these producers are unlikely to be able to profit a lot from tariff walls.”

Citing historical data, he emphasized that import competition forces firms to be more productive, while “shielding firms from competition is not a good way to improve the economy’s performance.”

Some sectors may benefit from temporary protection, he said, but the overall “losses to US profitability will exceed the gains.”

Thorbecke also pointed to the Federal Reserve’s growing concern about inflation driven by tariffs, which may force tighter monetary policy and suppress investment.

“We are facing a very rocky economic environment. Until this changes, the stock market is unlikely to recover,” he said.