President Donald Trump’s big “Liberation Day” announcement went down badly in the markets, as fears mounted that the bigger-than-expected reciprocal tariffs would trigger a recession. The surge in March payrolls should have soothed those fears a little. We still think the US can avoid an economic contraction, but it depends crucially on whether the additional customs duties raised from the tariffs are quickly recycled into the economy in the form of additional tax cuts. With Senate Republicans unveiling an aggressive budget proposal this week, that is looking increasingly likely.
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