Markets whipsawed further Friday in response to President Donald Trump’s latest comments on tariffs, with stocks briefly turning higher after he hinted that there may be “flexibility” in his plan to impose blanket tariffs on most U.S. trading partners next month before retreating back into the red.
In remarks in the Oval Office, Trump said he was not interested in making exceptions to the broad “fair and reciprocal” duties he’d foreshadowed in February that he now says will be imposed April 2.
But he nevertheless offered some daylight.
“I don’t change. But the word flexibility is an important word,” Trump said. “Sometimes it’s flexibility. So there’ll be flexibility, but basically it’s reciprocal.”
The president singled out China, saying there would be room for “talk” on trade issues with the country while adding he hoped to meet with Chinese President Xi Jinping in the near term.
Despite that bit of give, it has become clear that the Trump administration is not backing down on its plan to establish sweeping trade levies, even as those efforts have sharply curbed near-term U.S. growth expectations while putting pressure on global GDP.
“Every member of the Trump administration is aligned on finally levelling the playing field for American industries and workers,” White House spokesman Kush Desai said in a statement to NBC News this week. “President Trump has assembled the best and brightest trade team in modern American history to reignite American Greatness, and they are hard at work following the same playbook — President Trump’s playbook — to deliver for the American people.”
Even as stocks have firmly entered correction territory — declining more than 10% from their recent highs — Trump and other administration officials have also not pushed back on the idea that the U.S. economy could be in for a rough patch as a result of its tariff policy. Asked by Fox News host Maria Bartiromo if he was expecting a recession this year, Trump replied, “I hate to predict things like that.”
Amid all of the developments around the Trump administration’s economic policy, the S&P 500 stock benchmark was set for its fifth-straight week without gains, finishing at levels last seen in September, while forecasters across the board reduced their outlooks for gross domestic product (GDP), the standard measure for a country or region’s growth.
The rest of the world is starting to adjust. The Organisation for Economic Co-operation and Development has revised its U.S. GDP forecasts down from 2.4% to 2.2% for 2025 and from 2.1% to 1.6% for 2026. Global GDP was also revised lower, from 3.3% to 3.1% in 2025 and 3.3% to 3.0% in 2026.
“Higher trade barriers in several G20 economies and increased geopolitical and policy uncertainty [is] weighing on investment and household spending,” the OECD said.
And while the European Union announced this week it was delaying its retaliatory tariffs on U.S. goods to allow for “additional time for discussions with the U.S. administration,” it was not seeking to “diminish the impact of our response,” it said, “in particular as the EU continues to prepare for retaliation of up to EUR 26 billion.”
“This approach allows us to deliver a firm, proportionate, robust and well-calibrated response to the U.S. measures, while minimising potential negative impacts on EU producers and consumers,” an E.U. spokesperson said.
Earlier this week, the Federal Reserve warned Trump’s tariffs could impose “transitory” price increases on consumers and businesses in the U.S.
“Some near-term measures of inflation expectations have recently moved up,” Fed Chair Jay Powell said Wednesday. “We see this in both market- and survey-based measures, and survey respondents, both consumers and businesses, are mentioning tariffs as a driving factor.”
He added that the on-again, off-again tariffs had ramped up overall uncertainty in the economy.
Despite an avalanche of threats, Trump has so far only implemented a global 25% tariff on steel and aluminum alongside additional levies on China totaling 20% on top of pre-existing ones. The president has twice suspended 25% duties on most goods coming from Canada and Mexico, while also threatening — but not implementing — 200% duties on Champagne and wine imports from the European Union.
But on Friday, Trump suggested the biggest global trade shake-up of all was coming in less than two weeks. On April 2, the U.S. will seek to impose massive trade duties on any and all nations that have imposed duties on U.S. exports — part of a move Trump has said is designed to level an uneven playing field for U.S. goods that contributes to America’s large annual trade deficit.
“April 2nd is Liberation Day in America!!!” he wrote on Truth Social. “For DECADES we have been ripped off and abused by every nation in the World, both friend and foe. Now it is finally time for the Good Ol’ USA to get some of that MONEY, and RESPECT, BACK. GOD BLESS AMERICA!!!”
In a new note, Gregory Daco, chief economist for the EY-Parthenon consultancy, said that while economic fundamentals “have been and remain disinflationary,” looking ahead, “tariffs, confusion around trade policy and tighter immigration policy mean the risks to inflation are tilted to the upside.”
“Not long ago, US exceptionalism dominated the narrative — now, the mood has turned sharply pessimistic. What changed?” Daco said.
Private-sector surveys, he said, have turned negative in recent weeks “due to broad based policy uncertainty & tariffs implementation.”
“Consumer sentiment has plunged, small business uncertainty is near record highs, purchasing managers are increasingly downbeat, and consumer inflation expectations are surging.”
The upshot?
There is now “rising stagflation risk” with both price growth and unemployment potentially trending higher, he said.
