New report predicts US is heading for a recession after Trump's tariffs cause markets to crash

As harsh tariffs on Mexico and Canada come into effect today (March 4), a new report claims President Donald Trump's could plunge the country into recession.

America hasn't been in recession since 2020, although that was a relatively short one. But now the 78-year-old's decision to follow through on high tariffs on trade coming from Mexico, Canada and China means US markets have crashed.

The countries two neighbors have been hit with 25 percent tax on all imports into the US, coming into effect today, while China's initial 10 percent tariff has been doubled by the Republican's administration due to China retaliating with its own high tariffs.

Now, the Federal Reserve Bank of Atlanta's GDPNow model anticipates that GDP growth for the first quarter of 2025 will fall by -2.8 percent - which is down from +3.9 percent just four weeks ago.

A country is deemed as being in recession when they enter two consecutive quarters of decline.

As the tariffs were introduced, global stock markets crashed, with S&P 500, Dow Jones and Nasdaq all falling sharply.

It's on the back of an executive order signed by Trump on one of his first days back in charge of the country.

President Donald Trump and Chinese President Xi Jinping (Qilai Shen/Bloomberg via Getty Images)

The Republican claims Canada, Mexico and China pose an 'extraordinary threat' due to the number of 'illegal aliens and drugs' smuggled into the States, and even constitutes it as a 'national emergency'.

In regards to China specifically, the White House added: "In response to China’s intellectual property theft, forced technology transfer, and other unreasonable behavior, President Trump acted with conviction to impose tariffs on imports from China, using that leverage to reach a historic bilateral economic agreement."

It all stems from a talk he gave to the House GOP (Grand Old Party, otherwise known as the Republican Party) retreat in Florida, toward the end of last month.

The high tariffs on Mexico, China and Canada come after Trump signed an executive order in January (Anna Moneymaker/Getty Images)

There he vowed to end federal income taxes, in favor of taxing foreign countries through tariffs - which he has done so far with China, and as of today (March 4) Canada and Mexico's shipped goods too.

With all this being said, it's important to detail why developed countries adopted federal income taxes.

Tariffs are taxes imposed on foreign goods, meaning many of these goods will cost more to sell in the US - so ultimately, the consumer will pay.

Advanced countries fell out of favor with tariffs following World War II, because they often lead to 'reduced trade, higher prices for consumers, and retaliation from abroad', the Council on Foreign Relations reports... which is what we've seen from China.