In an era marked by heightened unpredictability, Torsten Slok, the chief economist at Apollo Global Management, has raised red flags about the state of the U.S. economy. With a prediction that there is a staggering 90% chance of a recession in 2025, if tariffs remain at current levels, Slok’s warnings should not be dismissed lightly. His concern centers largely on the tariffs imposed on China, which, if sustained, pose a dire threat—especially to small businesses that form the backbone of the American labor market.
The Weight of Tariffs on Small Businesses
The implications of Slok’s analysis are particularly unsettling for small enterprises: those with fewer than 500 employees, which constitute 80% of total U.S. employment. With tariffs on Chinese imports raised to an unprecedented 145%, the economic burden crushes these businesses under the weight of increased costs. Slok argues passionately that small businesses do not possess deep pockets. A surge in tariffs threatens to push many into bankruptcy, raising a clarion call for immediate action.
Unlike their larger counterparts, small businesses often lack the financial resilience to endure prolonged periods of economic stress. Slok highlights how these businesses, already operating on thin margins, may have to navigate an uncertain landscape filled with soaring costs and plummeting consumer confidence. It’s a grim scenario that brings to mind the age-old warning of “what doesn’t kill you makes you stronger”—but for small businesses, this could be an existential threat rather than mere hardship.
Job Losses and Economic Sentiment
As these businesses struggle, the broader implications for the American workforce and consumer sentiment are equally alarming. With a wave of small business bankruptcies likely lies ahead, the labor market can be expected to follow suit. Job losses, which inevitably accompany the failure of these businesses, will first manifest in the weekly jobless claims reports. It’s here that the real consequences of ill-advised tariff policies will crystallize. Slok’s assertion that “we should expect to see” job market weakness is more than an educated guess; it’s a forewarning of broader economic malaise.
Consumer sentiment is equally susceptible to economic shocks. If small businesses falter, the cascading effects on consumer spending—historically the backbone of the U.S. economy—could drive the economic engine into a downward spiral. When workers feel uncertain about job security or sense a downturn in the economy, they cut back on spending, which in turn stifles growth and further exacerbates the recessionary conditions Slok so vividly predicates.
The Unpredictable Landscape of Tariffs
The recent history of tariffs adds another layer of complexity to the economic forecast. Certainly, Slok is not an outlier in his recession predictions; other Wall Street analysts echo similar sentiments. For instance, JPMorgan’s David Kelly also indicated the significance of tariff outcomes, citing a 60% chance of recession depending on whether these punitive measures remain.
However, the erratic nature of tariff legislation makes accurate forecasts exceedingly difficult. Tariffs frequently shift under political pressure, leaving both analysts and businesses grappling with uncertainty. In an economic climate where agility is paramount, businesses require stable and predictable policies to navigate potential crises. The quagmire of unpredictable tariffs undermines that stability, killing innovation and risking a stagnation of growth.
A Call for Center-Right Solutions
As a proponent of center-right liberalism, it is essential to advocate for policies that support small businesses through constructive means rather than punitive tariffs. A shift toward tariff reduction, complemented by targeted support for small enterprises, would place America on a path toward sustainable economic growth. The current trajectory, marked by excessive taxation in the form of tariffs, not only endangers small businesses but also undermines the very foundation of the American economy.
In an age marked by economic volatility, the time for action is now. By realigning our approach to tariffs and fostering a business-friendly environment, we can pivot away from the brink of recession and reignite the entrepreneurial spirit that defines the U.S.