Experts are sounding the alarm about the U.S. economy, saying the chaos President Donald Trump and co-President Elon Musk have unleashed over the past month could send the country into a devastating recession.
According to economists, Trump and Musk’s slashing of federal contracts and the federal workforce through their slapdash Department of Government Efficiency effort is leading private industries to cut back—a move expected to have negative downstream impacts on local economies.
“It seems almost unavoidable that we are headed for a deep, deep recession,” Jesse Rothstein, a former chief economist at the Department of Labor who now serves as an economics professor at the University of California, Berkeley, told The Telegraph.
Trump and Musk have cut thousands of federal jobs and abruptly slashed government contracts for things like medical research, threatening state economies, as thousands of jobs at universities and other medical research facilities are dependent upon federal funding.
“Make no mistake, these times pose an existential threat to healthcare institutions, to academic medicine, and to the academy as we know it,” Jon Epstein, the dean of the University of Pennsylvania’s Perelman School of Medicine, told the university earlier this month.
What’s more, Trump’s threats of significant tariffs are paralyzing private industries, which have quickly soured on Trump’s tenure.
“The chaos that is reigning right now is causing everyone to sit on their hands,” Nasdaq Private Market CEO Tom Callahan said, according to the news outlet Semafor.
Ultimately, Trump’s chaos led Rothstein to predict that the devastation would start to arrive in April or May, when the economy could start shedding jobs at a rate rivaled only by the job losses during the first months of the COVID-19 pandemic and the Great Recession.
“Losses of 400,000 a month are not implausible because people are getting nervous out there,” Rothstein told The Telegraph.
“There are all kinds of spillovers. Contracts for external contractors are being cut. Nobody knows how much imports are going to cost next month, or if we are even going to have accurate weather forecasts any more,” he added. “How could you hire in these conditions? This is going to be very, very bad.”
Already, economic indicators are starting to flash red.
Consumer spending declined by 0.2% in January, the Commerce Department’s Bureau of Economic Analysis announced on Friday, with consumers cutting back on spending on vehicle parts, recreational goods, clothing, food and beverages, and household furnishings.
Washington Post economic columnist Heather Long called the decline in consumer spending a “warning sign for the economy.”
Meanwhile, the Department of Labor announced on Thursday that jobless claims rose last week to a three-month high, with 242,000 people applying for jobless benefits for the week ending on Feb. 22, amid Trump and Musk’s slashing of jobs throughout the federal government.
Another bad sign is that inflation has remained stubbornly high, rising in January thanks to massive increases in egg prices.
Meanwhile, consumer confidence in February saw the largest monthly drop since August 2021, CNN reported on Tuesday,
“The fact that consumers don’t feel like it’s smooth sailing—you’ve got one very obvious suspect. That’s the White House, which is sowing uncertainty just about everywhere, whether it comes to trade policy or foreign policy,” Justin Wolfers, an economics professor at the University of Michigan, told CNN. “I genuinely understand why consumers are nervous and I hope this doesn’t turn out to be a self-inflicted own goal.”
