US Economy on Brink of Recession: Moody’s Chief Economist Warns Tariffs Hurting Growth

Sep 4, 2025

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The U.S. economy is showing fresh signs of distress as Moody’s Chief Economist, Mark Zandi, warned that the country could be on the brink of a recession. Rising tariffs, restrictive immigration policies, and weakening consumer demand are putting immense pressure on growth. While the administration projects confidence, economists believe the warning lights are flashing red.

In this article, we’ll cover:

Why Moody’s warns of recession
Impact of tariffs on businesses and households
Sectors most at risk
What this means for jobs, housing, and consumers
Political implications for the Trump administration

⚠️ Why the Recession Warning?

According to Moody’s analysis, nearly one-third of the U.S. economy is either already in recession or at high risk of slipping into one. Another third of states remain stable, while the rest are still growing, but the overall momentum is weakening.

The key reasons behind this vulnerability include:

Tariff Burden: Higher import costs are eating into corporate margins and pushing up consumer prices.
Immigration Restrictions: A shrinking labor pool is straining industries like agriculture, construction, and services.
Housing Market Pressure: Mortgage rates and affordability issues are cooling demand.
Job Growth Slowdown: Hiring momentum is fading outside of healthcare and select services.

📊 US Economy Snapshot – September 2025

Factor	Status	Impact
Recession Risk	~1/3 of U.S. states in/near recession	Growth slowdown spreading
Tariffs	Higher costs on imports & goods	Rising prices for consumers
Immigration Policy	Tighter controls	Labor shortages in key sectors
Job Market	Weakening outside healthcare	Fewer opportunities for middle class
Housing Sector	Declining demand & affordability issues	Risk of market correction
Consumer Sentiment	Weakening	Reduced household spending

🛒 Impact on Consumers

Higher Prices: Everyday goods and essentials are getting costlier due to tariffs.
Housing Worries: Families are postponing home purchases as affordability weakens.
Job Uncertainty: Middle- and lower-income households feel the squeeze as employment opportunities slow.

🏭 Impact on Businesses

Rising Input Costs: Tariffs have raised raw material and supply costs.
Reduced Expansion: Companies are cautious about hiring and investments.
Global Competitiveness: Export industries are hit as trade tensions escalate.

🏚️ Sectors Under Pressure

Housing & Construction – Decline in new projects, mortgage stress.
Manufacturing – Higher costs from tariffs, falling export demand.
Retail & Consumer Goods – Lower demand due to rising prices.
Transportation & Logistics – Ripple effect from slower trade activity.

🔎 Political Implications for Donald Trump

This economic downturn warning is politically sensitive for President Donald Trump. His administration has often highlighted strong GDP growth and a resilient economy. However, the tariff-led policy framework—intended to protect U.S. industries—may now be contributing to rising prices and slower growth.

With elections nearing, economic performance will be under sharp scrutiny. A downturn could weaken the administration’s narrative of financial strength and stability.

📅 What Lies Ahead?

Economists caution that without a policy shift, the risk of a nationwide recession will rise toward the end of 2025. Policymakers will need to address:

Tariff pressures on households and industries.
Labor shortages caused by immigration restrictions.
Fiscal measures to support middle-class spending.

📝 Conclusion

The U.S. economy stands at a critical juncture. Moody’s warning underscores the fragile balance between growth and contraction. Rising tariffs and restrictive policies are increasing costs for businesses and households, while weakening housing and job markets signal deeper trouble ahead.

For ordinary Americans, this means higher expenses, fewer job opportunities, and economic uncertainty. For policymakers, the challenge is clear: act decisively or risk a full-blown recession by late 2025.