President Donald Trump wanted to avoid sending the economy into a depression through his contentious plan for tariffs, according to The Wall Street Journal.
Trump privately said he was aware that his broad and steep plan for levies unveiled last week could tip the economy into a recession, but he didn’t want a depression, according to a Wednesday night report from the paper, citing people familiar with the conversations.
Trump also told advisors that he was willing to accept “pain” over the policy, a person who spoke with him on Monday told the Journal.
A depression is considered by economists to take place when a recession becomes more severe and entails higher unemployment and a more prolonged downturn. The U.S. has avoided them since the Great Depression in the 1930s — when unemployment hit 25% — because of progress in monetary policy and fiscal policy, along with programs like deposit insurance from the Federal Deposit Insurance Corp.
While many economists were starting to predict a recession from Trump’s high tariffs paralyzing global trade, none were saying it would lead to a depression.
Bond yields soared while equities cratered in the days before Trump said he would rollback some of his country-specific tariffs on Wednesday. His reversal powered a sharp comeback in the stock market, with the S&P 500 on Wednesday registering its best day since 2008.
Kevin Hassett, director of the U.S. National Economic Council, told CNBC on Thursday that the bond market decline contributed to Trump’s decision. The 10-year Treasury yield overnight Tuesday into Wednesday spiked above 4.5% on speculation a big foreign holder like Japan or China was dumping bonds. Bond prices move inversely to yields.
“Everything was moving forward in an orderly fashion,” Hassett said on CNBC’s “Squawk Box.” “There’s no doubt that the Treasury market yesterday made it so that the decision that, you know, it is about time to move was made with, I think, perhaps a little more urgency. But it was going to happen.”
Trump also acknowledged the role of investor concerns during remarks made after the decision on Wednesday.
“I thought that people were jumping a little bit out of line,” Trump said. “They were getting a little bit yippy, a little bit afraid.”
The White House did not immediately reply to CNBC’s request for comment about Trump’s reported concerns about a depression.
A driver of Trump’s alterations was the rising role of Treasury Secretary Scott Bessent in advising on trade policy, according to the Journal, which cited people close to the situation. The number of countries negotiating with the White House also made Trump open to switching course, a person who talked with the president told the Journal.
Read the full Wall Street Journal report here.
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