Apollo Global Management’s chief economist warns there is a high likelihood—about 90%—that the United States could enter a “Voluntary Trade Reset Recession” if new tariff policies tied to the Trump administration are implemented. This term refers to an economic slowdown driven by deliberate changes to trade barriers that reduce imports, disrupt supply chains and raise costs for businesses and consumers.
Small businesses are seen as especially vulnerable in this scenario. Many small firms operate with limited working capital and thin margins, making them less able to absorb sudden tariff-related cost increases. Higher input costs and supply disruptions could force some small businesses to raise prices, cut back on hiring, reduce investment or, in severe cases, close operations.
Forecasts among major financial institutions vary. Morgan Stanley and Goldman Sachs have placed the odds of a recession in the 40–45% range, reflecting significant risk but less than the most dire estimates. JPMorgan’s outlook is more pessimistic, with analysts assigning roughly a 60% chance of a downturn. These differing assessments reflect variations in models, assumptions about how tariffs would be phased in and expectations for fiscal and monetary policy responses.
Despite these concerns, White House officials have expressed optimism about the potential economic outcomes of tariff changes, arguing that a rebalancing of trade could benefit domestic industry and increase investment. Skepticism remains widespread among many economists and market observers who point to historical evidence that trade disruptions tend to slow growth and raise consumer prices.
Prominent economists have joined the debate with strong warnings. Ray Dalio has highlighted how trade conflicts tend to unsettle financial markets and global supply chains, while former Treasury Secretary Lawrence Summers has estimated that a tariff-driven slowdown could lead to significant job losses. Summers suggested the possibility of as many as 2 million additional Americans becoming unemployed under a severe trade shock scenario, a figure that underscores how concentrated shocks to trade and production can translate quickly into labor-market hardship.
Key risks in a tariff-driven recession include supply-chain fragmentation, higher consumer prices, reduced corporate earnings and constrained access to imported inputs that many U.S. manufacturers rely on. In response, policymakers could use monetary easing, targeted fiscal measures or adjustments to tariff policy to mitigate the impact. However, the timing and scale of such responses are uncertain, and the lag between policy action and economic recovery can prolong pain for households and businesses.
For small businesses, practical steps to prepare include building cash reserves where possible, diversifying suppliers, renegotiating contracts, and reviewing pricing strategies to preserve margins without losing customers. Larger firms may seek to hedge currency and commodity exposure, relocate parts of supply chains, or invest in automation to reduce reliance on imported inputs.
While economists and financial institutions disagree on the exact probability of recession, the consensus is that significant tariff increases would elevate recession risk, strain smaller enterprises and inject uncertainty into hiring and investment plans. Monitoring policy developments, revising contingency plans and engaging with industry associations and lenders can help businesses and households better position themselves if trade policy shifts become reality.