Recession fears are rising as investors, economists, and business executives worry that President Trump’s tariffs could stall the economy. Tariffs may raise prices for consumers, which can slow spending and cause businesses to delay investment in new projects. In addition, if foreign countries respond to US tariffs with their own increases, it can lead to higher prices for businesses that export goods and services to the U.S. This can also dampen demand and prompt firms to reduce production or lay off workers.
Job losses in high-income and white-collar sectors typically reduce overall consumer spending, which can trigger a downward spiral. For example, if skilled professionals lose jobs and confidence drops, they might cut back on discretionary purchases such as travel or electronics, which can directly affect retail, housing, and services. This can in turn further slow economic growth and potentially lead to a recession.
In the past, short-term shocks such as oil price spikes, rapid monetary policy tightening, or restrictive lockdowns have often signaled the onset of a recession (Leduc and Sill, 2004, year; Kilian and Vigfusson, 2017). However, searches for “recession” on Google have also risen, suggesting that fears about a future economic downturn are growing. To assess the impact of recession fears, we created a real-time tracker that tracks the evolution of a measure of economic uncertainty. Unlike existing Google search-based indices, which are based on terms that researchers choose, our index is fully economic agent-determined and uses keywords searched for by financial market participants to capture concerns about the economy.