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Investing.com-- The likelihood of a U.S. recession in 2025 has increased to 35%, up from 15% in December, as the economic impact of new tariffs takes hold, Alec Kersman, managing director at Pimco, said at CNBC’s Converge Live event on Wednesday.
Kersman noted that while Pimco still expects the U.S. economy to grow by 1% to 1.5%, the outlook has weakened significantly due to trade disruptions.
Higher tariffs, including those imposed by President Donald Trump on Canadian steel and aluminum, could weigh on economic activity, he said.
However, Kamal Bhatia, CEO of Principal Asset Management, suggested that tariffs might also boost domestic spending, potentially offsetting some of the negative effects.
Consumer spending, which accounts for nearly two-thirds of U.S. GDP, could rise as trade tensions encourage more localized purchasing, Bhatia said in the CNBC event.
Pimco remained cautious, warning that prolonged trade conflicts could further dampen growth.
President Trump on Tuesday announced an increase in tariffs on Canadian steel and aluminum imports to 50%, only to retract the decision hours later, reinstating the original 25% tariffs.
In his congressional speech on Wednesday, Trump reaffirmed plans for reciprocal tariffs, set to take effect on April 2. This move could further escalate trade tensions.