Is a soft landing turning into a hard landing? Trump's policy shift sparks panic on Wall Street

In the past year, the United States has focused its economic policy on achieving a "soft landing," avoiding recession while controlling inflation.

However, a report by The Wall Street Journal on the 11th indicated that a series of recent statements and policies from Trump and his senior advisors show that they exhibit "indifference" to risks such as trade uncertainty, stock market declines, and even short-term inflation increases.

The recent shift in attitude from the Trump administration is particularly concerning. For example, during an interview with Fox News, Trump avoided questions about a potential recession and instead emphasized that "to build a strong country, we cannot just focus on the stock market." In subsequent remarks, Trump insisted that "tariffs will make America rich again." Treasury Secretary Scott Bessent even suggested that the U.S. economy may need a "reset" after years of federal spending and rising asset prices.

The policies of the Trump administration may not only exacerbate the current economic instability but could also lead to greater chaos. According to analysis from JPMorgan Chase, the risk of recession has risen from 30% to 40%. Goldman Sachs has also predicted that the likelihood of a recession in the next year has increased from 15% to 20%. Many analysts are beginning to reassess the economic policies of the Trump administration, believing that its potential high pressure on the economy could lead to stagnation or even recession. Dario Perkins, chief economist at GlobalData TS Lombard, stated that the market has now returned to a "recession watch" status.

Stock Market Plummets, Corporate Confidence Shaken, Is the U.S. Moving from "Soft Landing" to "Hard Landing"?

The remarks from Trump and his team have triggered a severe market reaction. On Monday, the Dow Jones Industrial Average plummeted by 890 points, a decline of 2.1%. The S&P 500 index fell by 2.7%, while the Nasdaq index dropped by as much as 4%, marking the largest single-day decline since 2022. All three major indices are below the levels seen on last November's election day.

Many companies are also feeling the shift in market sentiment. Delta Air Lines stated that due to a slowdown in domestic market demand, the company has reduced its earnings and revenue expectations for the first quarter. CEO Ed Bastian noted that the company saw a "significant shift" in sentiment in February, with "consumer spending beginning to stagnate."

Analysts believe that the recent shift in attitude from the Trump administration is particularly concerning. Initially, the government seemed to downplay the risks of rising government bond yields due to inflation or blamed the potential threat of economic slowdown on the previous Biden administration. However, recent remarks appear to have gone beyond this scope.

Dario Perkins, an economist at GlobalData TS Lombard, stated:

"Now, there is almost a sense that if something goes wrong with the economy, it's okay.

This makes people very nervous because if it comes to the point of pushing the economy into recession, there is no guarantee it will be over quickly." Michael Strain, head of economic policy research at the American Enterprise Institute, also believes that the market may have given up on Trump's promises.

Economists at JP Morgan believe that due to "extreme U.S. policies," the risk of economic recession has risen from 30% to 40%. Goldman Sachs also expects U.S. economic growth to be weaker than Wall Street's general expectations, raising the 12-month recession probability from 15% to 20%. George Mateyo, Chief Investment Officer at Key Private Bank, believes this is more like a growth panic rather than a recession, "largely artificially created."

Policy Risks: Tariffs, Layoffs, and Economic Uncertainty

In addition, the market must cope with the Trump administration's "two-pronged" strategy of significantly reducing federal government employees while threatening to impose hefty tariffs on its major trading partners.

Strain points out that the difficulty in predicting potential changes in import prices could lead to investment spending "coming to a complete halt in the first quarter."

Moreover, without sustained job growth, reducing federal government employees may require the private sector to absorb these workers, but whether the private sector is prepared depends on how much they do not know about the tariffs that will increase on the goods and materials they need to import. The Trump administration's simultaneous policy experiments could potentially disrupt the fragile balance of "slow hiring, slow layoffs" that defines the post-pandemic economy.

Consumer confidence surveys indicate that households' expectations for their future financial situation have seen the largest decline in just one month, marking the biggest monthly drop since 2023, reflecting public pessimism about the economic outlook. Respondent households' expectations of missing debt payments have risen to the highest level since April 2020.

All of this suggests that the hotspots of consumer spending are fading, which is clearly an ominous sign for an economy reliant on consumption.

Analysts believe that the Trump administration's policies could not only exacerbate the current economic instability but could even lead it into greater chaos. Andy Laperriere, head of policy research at Piper Sandler, points out that market investors are worried that Trump may adopt more aggressive policies during an economic downturn rather than genuinely attempting to correct his current economic policies