The Intellectual Investor: Tariffs, Debt, and a Recession by Design

Is President Trump trying to engineer a recession? Some think so. By vastly increasing tariffs, markets have sold off at a pace last seen during the Covid-induced recession in 2020.

That seems at odds with Trump’s prior claims about focusing on a strong economy and creating American jobs. So what gives? More lies at stake, and it ties in with other initiatives the Trump team is undertaking now.

Currently, about $9 trillion of the $37 trillion national debt needs refinancing by the end of 2026. By creating fear and crashing the markets, interest rates should come down. That will lower the cost of refinancing that debt coming due. Every percentage drop can save the U.S. government billions of dollars in interest payments to bondholders.

Meanwhile, tacking the deficit with the spending cuts from DOGE, the government’s cash flow improves. The cuts aren’t enough to create a surplus, but it’s a strong shift from running massive $2 trillion annual deficits.

Plus, with government spending cuts, GDP looks likely to decline, and unemployment to rise. By leaning into things now, any economic slowdown can shift towards a more bullish outcome.

Investors don’t care for this strategy, as seen with the recent selloff. And engineering a recession runs a dangerous gambit that may simply lead to a recession.

To see the full analysis, click here.