Uncertainty sparked by constant White House pivots on tariffs has potentially delayed business investments and prompted consumers to pull back on spending, said Paul Gruenwald, global chief economist at S&P Global Ratings.
He pointed to the “reinventing government” downsizing push in the 1990s under then president Bill Clinton, which he said was executed in a “predictable and orderly” manner.
“If this leads firms and consumers to hold back on their spending and demand pulls back, we could get a slowdown or even a recession that was largely avoidable,“ Gruenwald said. “That is a downside risk.”
Gruenwald pointed to a spike in the US economic policy uncertainty index, a benchmark that has gotten more attention since Trump returned to the White House.
The index is currently at one of its highest levels in its 40-year history -- below its highest-ever reading at the start of the Covid-19 pandemic, but above the level seen during most of the first Trump administration.
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