Recently, cryptocurrencies have frequently staged 'roller coasters', with Bitcoin dropping over $9,000 in 24 hours. Behind this extreme volatility, a series of radical policies from the Trump administration are becoming the biggest uncertainty in the market.
From increasing tariffs to layoffs in the DOGE sector, from cutting $2 trillion in government spending to promoting tax cuts, these seemingly contradictory policy combinations may be hiding a bold 'recession plan.'
Trump's 'recession script'
The current scale of US national debt has exceeded $36 trillion, with interest payments alone expected to reach $1.3 trillion in 2025. If current interest rates remain unchanged, the interest alone over the next 10 years will 'consume' all of America's military spending. Therefore, the Trump administration can only use the path of recession to exchange for interest rate cuts to lower rates. If interest rates are cut by 1%, it could save $400 billion in interest.
Additionally, the Trump administration is attempting to reshape the US economic structure through means such as increasing tariffs, cutting government spending, and layoffs. The policy of imposing a 25% tariff on China, the European Union, etc., not only drives up domestic prices in the US (with an expected annual tax burden increase of $800 per household by 2025) but also leads to soaring corporate costs, forcing the manufacturing industry to return to the homeland. Meanwhile, the federal government plans to drastically reduce annual spending from $7 trillion to $6 trillion and push for millions of federal layoffs, directly impacting the job market — the number of first-time unemployment claims in the Washington area surged fourfold, shifting the economic growth engine from government dependency to private sector leadership.
Political timeline
The most likely 'script' is recession - interest rate cuts - midterm elections.
In the next six months: economic recession, US stock market crashes, blame shifted to Biden;
Mid-year: the Federal Reserve is forced to cut rates or even restart QE;
In the first half of next year: tax reduction policies take effect, US stocks rebound, GDP growth rate recovers;
Midterm elections in 2026: the Republican Party uses 'economic recovery' as an achievement to compete for control of both houses.
Wall Street has voted with their feet: institutions like Goldman Sachs and Blackstone are betting on an economic recession, while Nasdaq volatility has surged; high-risk assets like Bitcoin are being sold off, and gold is being viewed positively in the long term. The Atlanta Fed model predicts that GDP will shrink by 1.5% in Q1 2025, marking the worst performance since the pandemic.
Future variables
Of course, all of this won't be so 'smooth sailing'; there are still several uncertain factors in between. For example, the independence of the Federal Reserve, which Powell has repeatedly emphasized the 'data dependency' principle, and whether the White House can manipulate the Federal Reserve to cut rates remains in doubt.
Increased tariffs may also become a 'smoke screen'. The betting platform Polymarket has opened speculation on when Trump will completely lift tariffs on various countries. According to relevant data, the probability of Mexico lifting tariffs before May is 73%, Canada is 60%, while China is only 13%.
What should ordinary people do?
For investments, it is advisable to appropriately increase defensive allocations such as gold, essential consumer goods (like food, medicine), etc. For high-risk assets like artificial intelligence and cryptocurrencies, it is wise to reduce positions and stay away from bubble speculation.
Is Trump 'deliberately causing a recession'? This question may not have a standard answer. But it is certain that the current policy mix has pushed the US economy to the brink of a cliff, and its impact has far exceeded the US mainland — global supply chain restructuring, financial market turmoil, and rising trade protectionism, each link is reshaping the rules of the world economy.
For ordinary investors, understanding the logic behind policies is more important than predicting short-term fluctuations.
