Torsten Slok, chief economist at Apollo Global Management, is confident that if tariffs exist, the US will fall into a recession this year.
“This is all subject to tariffs that stay at these levels. If you stay at these levels, there will be an absolute recession in 2025,” Sloak told CNBC’s “Squawk on the Street” on Monday.
If the high tariffs introduced earlier this month remain in effect this month, two-quarters of economic output could be 90% contraction, and gross domestic product could fall by 4 percentage points, according to economists at private equity firms. On April 9, President Donald Trump gave 90 days to many tariffs and hiked them to 145% of China.
The Sloke’s recession forecast is China’s tariffs. He argues it is especially harmful to small businesses who are unlikely to keep enough cash on hand to pay higher taxes on imported goods.
“They basically don’t have the money and cash to pay the 145% extra,” Sloak said. “So if this is allowed to continue, there will be bankruptcy of very large sized retailers.”
Work and emotional damage
A slump in retail will undermine the labor market and consumer sentiment, as small and medium-sized businesses with fewer than 500 workers account for 80% of total employment.
Special attention should be paid to weekly unemployment claim reports, as weaknesses in the job market appear first. “The impact of tariffs, especially on China, remains heavily on small businesses, especially on small businesses,” Sloak said. “And we haven’t seen it with claims that are still unemployed, but we should expect to see it.”
Although recession calls grew on Wall Street in April, frequent tariff changes made it nearly impossible for forecasters to measure the full impact. Earlier this month, shortly after the April 2 announcement of JPMorgan Asset Management, David Kelly of JPMorgan Asset Management said there is a 60% chance of a recession depending on whether high tariffs are maintained.