What are they, and when do they happen? : NPR

Employees in the trading room of Nordea Markets follow Monday’s sharp stock market declines in Oslo. The Trump administration’s tariffs are fueling concerns about the prospect of a recession, in the U.S. and globally.

Ole Berg-Rusten/NTB/AFP via Getty Images

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Ole Berg-Rusten/NTB/AFP via Getty Images

The Trump administration’s new tariffs on imported goods from countries around the world have rattled consumers, stoked a trade war, roiled global markets and fueled widespread concerns about the prospect of a recession, both in the U.S. and globally.

In the days since President Trump announced the sweeping baseline and “reciprocal” tariffs, Google searches for the term “recession” have surged and economists at prominent investment banks have pointed to increased odds of a recession occurring.

In a Sunday note to clients, Goldman Sachs raised the probability of a U.S. recession from 35% to 45% — and that’s assuming the tariffs are rolled back. If the country-specific tariffs take effect Wednesday as intended, the firm says, “we would revise our forecast to include a recession.”

In a research report last week titled “There Will Be Blood,” JP Morgan upped its risk of a global recession to 60% from 40% before the tariff announcement.

Its CEO Jamie Dimon doubled down on Monday, writing in his annual letter to investors that the tariffs “will likely increase inflation” and are prompting “many to consider a greater probability of a recession.”

“Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth,” Dimon wrote.

There are growing calls for Trump to delay or reduce the tariffs coming from voices on Wall Street, Capitol Hill and around the world. Administration officials said Sunday that more than 50 countries have reached out to begin negotiations — but have also said the tariffs will not be postponed.

In an interview with NBC’s “Meet the Press” on Sunday, Treasury Secretary Scott Bessent downplayed concerns about a recession, saying, “We’re going to hold the course.” Pointing to March’s better-than-expected jobs report, he said he sees “no reason that we have to price in a recession.”

“There doesn’t have to be a recession,” he added. “Who knows how the market is going to react in a day, in a week. What we are looking at is building the long-term economic fundamentals for prosperity.”

With all this talk about a potential recession, it’s worth taking a look at what the term actually means — and who decides when it applies.

What is a recession? 

A recession refers to a period of decline in economic activity. It’s one of the four stages of the economic cycle: growth, peak, contraction (or recession) and trough.

Some analysts use a rough rule of thumb to identify recessions: Two consecutive quarters of decline in a nation’s gross domestic product (GDP) — the broadest measure of economic activity. 

But the National Bureau of Economic Research (NBER) — the nonpartisan, nonprofit research organization that has become the semi-official arbiter of recessions — uses a somewhat squishier definition. It calls a recession a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

Who declares a recession? 

The job of documenting the economic cycles, including recessions, does not fall to the federal government.

Instead, the NBER’s Business Cycle Dating Committee — made up of top American economists — has been declaring the beginning and end of the cycles since its creation in 1978 (NBER itself is decades older).

There is no fixed rule about how long NBER takes to identify a recession after a decline has started. It says on its website that past determinations have taken anywhere from four to 21 months.

“We wait long enough so that the existence of a peak or trough is not in doubt, and until we can assign an accurate peak or trough date,” NBER says.

For example, it announced in June 2020 that the U.S. had officially entered a pandemic-induced recession months earlier, in February. It announced over a year later that the 2020 recession…