Lawrence McDonald, founder of Bear Traps Report, warned on Sunday that President Donald Trump‘s planned tariffs could have a more significant inflationary impact during his second term compared to his first administration.
What Happened: During Trump’s first term, tariffs and inflation came after a prolonged period of global austerity, secular stagnation, and Brexit’s impact, McDonald wrote on X. In a second term, they would follow a $16 trillion fiscal and “monetary overdosing.”
McDonald’s comments come as markets brace for Trump’s Apr. 2 “Liberation Day” tariff announcements, with stock futures declining Sunday night.
McDonald’s analysis contrasts with Council of Economic Advisers Chair Stephen Miran, who previously argued tariffs during Trump’s first term didn’t cause inflation due to “currency offset” as the dollar strengthened.
Meanwhile, Goldman Sachs has raised its U.S. recession probability from 20% to 35%, as highlighted by Allianz Chief Economic Advisor Mohamed El-Erian. The investment bank also revised its 2025 personal consumption expenditures inflation forecast upward to 3.5% while projecting GDP growth to slow to 1.0% quarter-over-quarter, giving its outlook what El-Erian called a “stagflationary twist.”
This economic uncertainty has rattled markets, with major indices poised to end March sharply lower. The SPDR S&P 500 ETF Trust SPY is down 6.27%, SPDR Dow Jones Industrial Average ETF DIA has dropped 5.15%, and Invesco QQQ Trust QQQ has tumbled 8.09%.
PIMCO Managing Director Tiffany Wilding maintains a similar recession outlook to Goldman Sachs at 30-35%, though she expects any recession would be “light” with a relatively quick recovery.
Investors now face a pivotal week with key economic reports including employment data, JOLTS, ISM’s business activity index, and retail sales figures—all while awaiting Trump’s tariff announcement and Federal Reserve Chair Jerome Powell‘s upcoming remarks.
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