Trump slump: Can the president restore trust in his economic plans after his tariffs create fear?

WASHINGTON (AP) - After a brutal stock market selloff because of his tariff threats, President Donald Trump faces pressure on Tuesday to show he has a legitimate plan to grow the economy instead of perhaps pushing it into a recession.

Trump was set to deliver an afternoon address to the Business Roundtable, a trade association of CEOs that during the 2024 campaign he wooed with the promise of lower corporate tax rates for domestic manufacturers. But his plans for tariffs on Canada, Mexico, China, steel, aluminum - with more to possibly come on Europe, Brazil, South Korea, pharmaceutical drugs, copper, lumber and computer chips - would amount to a massive tax hike.

The stock market's vote of no confidence over the past two weeks puts the president in a bind between his enthusiasm for taxing imports and his brand as a politician who understands business based on his own experiences in real estate, media and marketing.

Harvard University economist Larry Summers, a former treasury secretary for the Clinton administration, on Monday put the odds of a recession at 50-50.

"All the emphasis on tariffs and all the ambiguity and uncertainty has both chilled demand and caused prices to go up," Summers posted on X. "We are getting the worst of both worlds – concerns about inflation and an economic downturn and more uncertainty about the future and that slows everything."

Trump has tried to assure the public that his tariffs would cause a bit of a "transition" to the economy, with the taxes prodding more companies to begin the years-long process of relocating factories to the United States to avoid the tariffs. But he set off alarms in an interview broadcast on Sunday in which he didn’t rule out a possible recession.

"I hate to predict things like that," Trump said on Fox News Channel’s "Sunday Morning Futures.” "There is a period of transition, because what we're doing is very big. We're bringing wealth back to America. That's a big thing. And there are always periods of - it takes a little time. It takes a little time. But I don't - I think it should be great for us. I mean, I think it should be great.”

The promise of great things ahead did not eliminate anxiety, with the S&P 500 stock index tumbling 2.7% on Monday in an unmistakable Trump slump that has erased the market gains that greeted his victory in November 2024.

S&P 500 futures pointed to a slight rebound on Tuesday, though not nearly enough to pare back Monday’s losses.