Trump Describes US Economy as in Transition Amid Escalating Trade War

US President Donald Trump declined to comment on whether the US economy is facing a recession or rising prices following his administration's shift in tariff policies towards some of its closest trading partners.

When asked if a recession was expected this year, Trump referred to a "period of transition" currently underway.

Meanwhile, Commerce Secretary Howard Lutnick assured that there would be no contraction in the world’s largest economy, although he acknowledged that the prices of certain goods could increase.

This comes after a turbulent week for US financial markets, as investors dealt with the uncertainty caused by the administration's reversal on key aspects of its aggressive trade policies.

New reciprocal tariffs from China, targeting certain US farm products, went into effect on Monday.

In an interview with Fox News, recorded on Thursday but aired on Sunday, Trump was asked about a potential recession. He responded, "I hate to make predictions like that. There is a period of transition because what we're doing is significant. We're bringing wealth back to America, and that's a major accomplishment."

"It takes a little time, but I think it should be great for us," he added.

Last week, the US imposed new 25% tariffs on imports from Mexico and Canada, only to exempt many of those goods just two days later.

Trump also increased the blanket tariff on Chinese goods to 20%. In retaliation, China announced new taxes on some US agricultural imports.

Starting today, certain US farm products, including chicken, beef, pork, wheat, and soybeans, will face new tariffs ranging from 10 to 15% when entering China.

Han Shen Lin, China country director at consultancy firm The Asia Group, told the BBC's Today programme: "We're seeing a lot of tit-for-tat actions from both sides, signaling that neither is willing to back down easily."

"That said China has realised it probably can't export its way to GDP growth in the way that it used to so it is focusing a lot more on the domestic economy right now."

The US president has accused China, Mexico, and Canada of failing to do enough to stop the flow of illegal drugs and migrants into the US, but the three countries have denied the allegations.

Stocks on Wall Street have dropped since Trump initiated a trade war with the US’s top trading partners.

Investors are concerned that tariffs will drive up prices and eventually slow down growth in the world’s largest economy.

Speaking on NBC on Sunday, Lutnick stated: "Foreign goods may become slightly more expensive, but American goods will become cheaper."

When asked if the US economy could face a recession, Lutnick responded, "Absolutely not… There will be no recession in America."

Frank Lavin, a former US Commerce Department official, told the BBC that he believes the trade war is unlikely to spiral out of control.

While tariffs may eventually "ease off a bit," he noted, they will still present an "additional burden on the US economy."

Rachel Winter, an investment manager at Killik & Co, shared with the Today programme that she anticipates the US will experience a period of higher inflation.

"Tariffs are theoretically inflationary and the level of tariffs that Trump is imposing, I think no doubt, will have to cause inflation somewhere down the line," she said.