Does Trump want a recession?

There “could be a recession,” said President Trump over the weekend with the kind of nonchalant shrug that suggested he was not too bothered one way or the other. He was even going to buy a Tesla to help out his “first buddy” Elon Musk as the company’s share price collapsed. The markets had assumed there was a “Trump put” — that the President would always ride to the rescue to keep the bull market running. But there is no sign of it. Instead Trump seems perfectly relaxed about the huge losses, even encouraging the sell-off. Of course, it might just that he does not know what to do. But it is also possible that he wants a correction, if not a full-blown crash, and is happy to see the indices fall.

It has been a very rough few days for Wall Street. On Monday, the NASDAQ saw its biggest one-day drop since September 2022, falling by almost 5 percent in a single brutal session. The broader-based S&P 500 fell by 3.6 percent. Some of the stars of the market have been especially badly hit. Tesla is now down by 41 percent since the start of the year. The chip-maker Nvidia is down by 22 percent. Trump Media, which you might expect the President to care about more than anything else, has fallen by 41 percent. All the gains that the market made since Trump’s election have now evaporated.

It is not hard to work out why. There are growing signs of a recession in the US, and the tariffs the President is imposing are likely to hit the profitability of America’s largest companies.

During his first term, Trump boasted constantly about the performance of the market. Surely he would come to the rescue by scrapping the tariffs, or demanding cuts in interest rates? Perhaps he will over the next few days. But right now he is simply saying a recession is possible, and that the US faces a “period of transition.” He does not seem in the least bothered about the collapse on Wall Street.

There may be a reason for that. Trump knows that Wall Street was massively over-valued on taking office. He knows as well that ending President Biden’s wild, deficit-funded spending, as well as significant redundancies as government waste is cut, will mean an inevitable slow-down in the economy. With that in mind, he is quite happy to see a correction take the froth out of the market, especially as it will help prevent a far worse crash in a year or two. In reality, he wants stocks to fall. It is a high-risk strategy, and of course it could easily get out of control. But if there is a limited 10 percent fall over the course of the spring it could just work.