Moody’s chief economist Mark Zandi has issued a stark warning that recent U.S. economic policies under President Donald Trump risk pushing the nation into a recession, citing escalating tariffs and restrictive immigration measures as key pressures. The caution follows a Bureau of Labor Statistics report revealing a stark slowdown in job creation, with just 35,000 jobs added monthly from May to July—a third of 2023’s average and the weakest growth since the pandemic-era lows of 2020.
Zandi, in a Sunday post on X, emphasized the economy is “on the precipice” of contraction, pointing to flatlining consumer spending, declining manufacturing activity, and looming employment drops. Adjusted for inflation, June consumer spending inched up a mere 0.1%, while annual price increases hit 2.7%—the steepest since February. Factory activity contracted for a fourth consecutive month, with orders and jobs dwindling. “The Federal Reserve has minimal flexibility to stimulate growth while inflation remains above target, particularly under current policies,” Zandi noted.
He directly tied the economic strain to Trump’s trade and immigration agendas, arguing that tariffs on hundreds of foreign goods are eroding corporate profits and household spending power. Simultaneously, stricter immigration enforcement, including plans to deport 4 million undocumented individuals over four years, threatens to worsen labor shortages. “Fewer immigrant workers mean a smaller economy,” Zandi stated, referencing concerns that reduced labor supply could stifle productivity across industries.
The Trump administration defends tariffs as a “reciprocal” tactic to rebalance trade terms and revive manufacturing, while framing immigration curbs as necessary for national security. However, critics across economic sectors warn of cascading risks. Federal Reserve Chair Jerome Powell cautioned that tariffs risk fueling both inflation and job losses, while the Economic Policy Institute projected that mass deportations could eliminate nearly 6 million jobs. The University of Pennsylvania’s Wharton School, Trump’s alma mater, warned such policies might slash worker wages, reduce GDP, and inflate the federal deficit.
Analysts highlight a precarious juncture for the U.S. economy: With inflation stubbornly high and labor markets cooling, policymakers face limited tools to avert a downturn. The compounding effects of trade barriers and workforce restrictions, experts argue, could leave the economy vulnerable to deeper structural challenges, complicating efforts to stabilize growth in the months ahead.
