Experts are sounding the alarm about the U.S. economy, warning that the chaos President Donald Trump and co-President Elon Musk have unleashed over the past month could send the country into a devastating recession.
Federal Cuts and Private Sector Fallout
According to economists, Trump and Musk’s aggressive slashing of federal contracts and jobs through their Department of Government Efficiency initiative is already causing private industries to scale back—setting off what experts say will have severe ripple effects 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 and now a professor at the University of California, Berkeley, told The Telegraph.
Impact on Medical Research and Universities
Trump and Musk have eliminated thousands of federal jobs and abruptly slashed government contracts for critical sectors, including medical research, threatening state economies that rely on federal funding. Universities and medical research facilities, in particular, are feeling the strain.
“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, dean of the University of Pennsylvania’s Perelman School of Medicine, told the university earlier this month.
Private Industries in Crisis
At the same time, Trump’s threats of significant tariffs are paralyzing private industries, which have become increasingly wary of his leadership.
“The chaos that is reigning right now is causing everyone to sit on their hands,” Nasdaq Private Market CEO Tom Callahan told Semafor.
Projected Economic Devastation
Rothstein predicted that the economic devastation could start manifesting in April or May, with job losses reaching levels comparable to the early 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 anymore,” he added. “How could you hire in these conditions? This is going to be very, very bad.”
Economic Indicators Flash Red
Economic warning signs are already appearing.
Consumer spending declined by 0.2% in January, according to the Commerce Department’s Bureau of Economic Analysis, with consumers pulling back 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, jobless claims rose to a three-month high last week, with 242,000 people applying for unemployment benefits for the week ending Feb. 22, as Trump and Musk continue slashing jobs across the federal government, according to the Department of Labor.
Stubborn Inflation and Declining Consumer Confidence
Inflation also remained stubbornly high in January, with rising egg prices fueling concerns.
At the same time, consumer confidence in February saw its sharpest monthly drop since August 2021, CNN reported.
“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.”