Mohamed El-Erian: Trump’s Tariffs Put the US Economy at Risk of Recession

Allianz Chief Economic Advisor Mohamed El-Erian warned on Friday that the sweeping tariffs imposed by US President Donald Trump could put the US economy at risk of recession.

El-Erian added that the comprehensive package of planned tariffs could have a significant impact on the global economy. “We’ve seen a significant reassessment of growth prospects, with the probability of a US recession rising to 50% and inflation expectations rising to 3.5%,” El-Erian told CNBC on the sidelines of the Ambrosetti Forum in Cernobo, Italy.

He noted that a US recession is not “inevitable” because the US economy is structurally strong, but emphasized that “the risk has become uncomfortably high.”

El-Erian also warned that markets may be underestimating the inflationary impact of the tariff regime. He added, “The first reaction was concern about growth, but we haven’t seen the other two reactions yet: What will happen to growth in other countries? Will the dollar continue to weaken? What will the Fed decide?”

Erian added, “I think if we’re lucky, we’ll get one rate cut, not four, and it wouldn’t be surprising if we don’t get any.”

“If the Fed is normal—and I’m emphasizing this very strongly, because it hasn’t been normal before—it’s unlikely we’ll get a single rate cut.”