Trump policies 'promise' recession if fully implemented, UCLA's economic forecasting center warns

• UCLA's Anderson Forecast warns Trump's policies "promise" recession if fully implemented.
• Tariffs, deportations, and job cuts are key risks to the US economy, the report says.
• The stock market could face further declines if a recession occurs.

UCLA's Anderson Forecast center says trouble may be coming for the US economy thanks to President Donald Trump's policies.

If Trump fully implements his tariffs, deportations, and government job cuts, a recession is a sure thing, a report authored by Clement Bohr, an economist at the forecast group, said on Tuesday.

To be clear, as things stand now, a recession is not Anderson Forcast's or Bohr's base case outcome. But the more that Trump has his way, the more that risks mount, Bohr wrote.

"The stated aim of the Trump Administration is to dramatically transform the US economy in its first 100 days and that beg

s the question: if fully or nearly fully enacted, could these initiatives cause enough sectors of the economy to contract at the same time and trigger a recession?" the report said.

The answer appears to be yes, that a downturn could result over the coming year or two, and that we should now be on a Recession Watch."

In a call with Business Insider on Thursday, Bohr likened his "Recession Watch" phrasing to the difference between a tornado watch and a tornado warning, with the former alerting people that conditions are present for a twister and the latter confirming that one has been spotted.

Three major policy initiatives combined pose risks to the economy, the report said: tariffs, deportations, and government job cuts.

With tariffs, Trump's plans are on a much grander scale this time than they were in his first term.

"The size of that trade war looks like pennies relative to what's currently contemplated," Bohr wrote.

Deportations mean a loss of jobs in the economy, not only for immigrant workers but for citizens as well, Bohr said.

"Immigrants occupy distinct occupations from much of the rest of the population, and once deported, they stop spending, paying rent and taxes here," he wrote.

Sectors hardest hit by deportations are the construction and agriculture industries, he said.

Regarding government job cuts, a reduction of 10% of the government workforce would result in around a million job eliminations, which would "amount to the largest single layoff event in U.S. history," Bohr wrote.

Still, it's not clear how far Trump's reforms will go. He has so far rolled back some of his tariffs on Mexico and Canada, and courts have overturned some of his government job-cutting efforts.

Investors and consumers have been taken aback by Trump's policies during the first couple months of his second term. The University of Michigan's Consumer Sentiment measure fell in mid-March to the lowest levels since late 2022, when inflation was still above 7%. The S&P 500, meanwhile, is down 7.7% from its February 19 peak as of market close on Friday.

If a recession does arrive, it would likely mean further downside for stocks generally, Bohr said, given how elevated valuations are. The S&P 500's Shiller PE ratio, which measures current stock prices against average yearly earnings over the last decade, still hovers around levels seen during the largest bubbles in history — namely those in 1929 and 2000.

According to Invesco, the average stock-market drawdown during recessionary periods from 1929-2020 is 30.5%.

Bohr emphasized, however, that neither he nor Anderson Forecast offer specific stock-market forecasts or predictions.

"I'm not giving stock-market advice, but even with the recent correction in stock prices, it's still highly valued, and it could still fall further, sure, certainly," he told BI.