Risk of US recession remains despite Trump delaying tariffs.

Trump postpones reciprocal tariffs but keeps tariffs on aluminum, steel, and cars, which could drag down US growth and consumption.

On April 9, US President Donald Trump announced a 90-day delay in imposing high reciprocal tariffs, temporarily reducing tariffs on most trading partners to 10%. However, tariffs on China were raised to 125%. This information was released just half a day after tariffs on the US's largest trading partners took effect.

US bank Goldman Sachs on April 9 raised its forecast for a US recession in the next 12 months to 65%, making it the most likely scenario. However, just minutes later, they withdrew this announcement when Mr. Trump announced the tariff postponement. "We will return to our old forecast, which is that recession is no longer the most likely scenario," Goldman Sachs said.

The tax postponement news has economists breathing a sigh of relief. However, concerns about a recession in the world's largest economy remain.

"I feel the US could still fall into recession, given the scale of the recent shocks. The US is just holding off on imposing heavy tariffs on its trading partners," said Joe Brusuelas, chief economist at consultancy RSM.

In fact, most of the tax policies that Mr. Trump announced during his term remain in place. These include a 25% tax on many goods from Mexico and Canada; a 25% tax on global imports of aluminum and steel; a 25% tax on cars, light trucks, and auto parts; and a 10% tax on nearly all of America's trading partners.

Even before the US announced the reciprocal tax, economists had frequently warned about the risk of recession due to the above policies. The US is a consumer economy, with this sector contributing up to 70% of GDP. Therefore, consecutive tax increases can cause goods to increase in price, reducing people's purchasing power. For example, according to the Center for Automotive Research, import taxes can make cars thousands of dollars more expensive for consumers, reducing sales and causing job losses in the US. The US auto industry is currently heavily dependent on imported components.

In March, the US consumer confidence index fell 7.2 points to 92.9 - the lowest level since January 2021. This index has been declining for the past few months, showing the pessimism of American consumers. A recent study by Yale University said that if Mr. Trump increased import tariffs by 20%, the average American household would spend an additional $3,400 a year.

Tax Type	Tax rate	Scope of application	Effective Date
Taxes with Canada, Mexico	25%	Mostly Mexican, Canadian goods	4/3
Aluminum and steel tax	25%	Global	12/3
Tax on cars, vans, auto parts	25%	Global	3/4
Tax 10%	10%	Most of America's trading partners	5/4
Countervailing tax	11-84%	Nearly 90 major US trading partners	9/4 (postponed)
Taxes with China	125%	All Chinese goods	9/4

The report released late last month by the US Federal Reserve (Fed) in Atlanta also showed that the US economy likely contracted last quarter, down sharply from the end of last year. However, the main reason was the cold weather in January, which held back consumption and production activities.

In addition, trade tensions with China have shown no signs of being resolved soon. The world's two largest economies have continuously responded to each other by raising import tariffs. After China announced it would raise tariffs on the US to 84%, the US on April 9 also imposed a 125% tariff on this country.

"If this situation continues, it will only pose serious challenges to both the US and Chinese economies," said Wendong Zhang, a professor at Cornell University. Last year, the US imported $438.9 billion worth of Chinese goods.

In the next 3 months, the White House expects dozens of governments to request to negotiate long-term trade agreements with the US. These are complex agreements that will take time to negotiate.

Before Trump announced the tariff delay, consulting firm RSM raised its recession forecast from 20% to 55%. Brusuelas said the US could be in recession in the next few months, as businesses feel the shock to their supply chains. "I have had clients tell me they have to leave their goods at the port because they don't have enough money to pay the tariffs," said Brusuelas, chief economist.

Many economists are also cautious. "The tariff delay is just a pause in the escalation of trade tensions, it doesn't mean we've solved all the problems. The uncertainty is still high. Now is the time to look back at the economic data to assess the damage over the past period," said Christian Hoffman, director of fixed income instruments at Thornburg Investment Management.

Goldman Sachs withdrew its recession warning, but maintained its view that the US will grow weaker this year. GDP of the world's largest economy may only increase by 0.5% in the fourth quarter. The probability of a recession remains at 45%. They also maintain their forecast of the Fed cutting interest rates by 25 basis points three times this year, in June, July and September. In just one week, Goldman Sachs has raised the probability of a US recession twice.

Justin Wolfers, an economist at the University of Michigan, said this view is a mistake. "The US still has the highest import tariffs in the developed world, 10-20 times higher than most of its trading partners and 10 times higher than before," he wrote on X.

Stephen Stanley, an economist at Santader, said it will take some time for businesses to invest and hire again, once they are sure the situation has stabilized. "If that happens, the risk of a recession will be completely pushed back," he concluded.