From Remote Possibility to Growing Threat: US Recession Risk Triples

A US recession, once thought unlikely, now looms as a real possibility. Clear warning signs have appeared in financial markets: 10-year Treasury yields have fallen by 70 basis points recently, and oil prices have slipped below $70 per barrel. These changes come alongside disappointing economic data and worries about President Trump’s trade policies and government reforms.

The economic slowdown is happening in three distinct phases. Lower-income households are feeling the squeeze first, with savings running out, credit cards at their limits, and debt increasing. Next, businesses have become cautious, taking a wait-and-see approach as policy uncertainties mount. Finally, this week’s move toward retaliatory tariffs threatens to break supply chains and slow economic growth worldwide.

Making matters worse, inflation remains high despite the slowing economy. This combination—weak growth with rising prices—could lead to stagflation and put the Federal Reserve in a difficult position as it tries to balance jobs and stable prices.

Some positive factors do exist: lower energy prices help both consumers and businesses, deregulation might encourage business investment, and technologies like AI and robotics could boost productivity long-term. However, the overall outlook has worsened considerably.

The risk of recession has jumped from just 10% at the beginning of the year to 25-30% today. Economists will likely cut their 2025 growth forecasts below the current 2.3% prediction—perhaps by as much as a full percentage point. This raises serious questions about whether the US economy is approaching “stall speed”—the point where growth becomes too weak to sustain itself.