Senate Republicans expressed new worries about the economy Monday after Wall Street had one of its worst days in years amid a trade war and remarks from President Trump that did not rule out the possibility of a recession.
The Nasdaq composite had its worst day in three years, closing with a loss of 4 percent, while the Dow Jones Industrial average fell by 890 points or 2.1 percent Monday and the S&P 500 index closed down 2.7 percent.
The dip in the markets came after days of increased uncertainty stemming from Trump’s repeated reversals on tariffs, which have alarmed a number of Republicans.
Trump tossed new worries on the fire when he declined on Sunday to rule out the possibility of a recession.
“I am concerned because of rising prices and paychecks not going as far as they used to go is very concerning,” said Sen. Shelley Moore Capito (R-W.Va.), a member of leadership.
“There’s definitely a lot of questions about the direction because the tariffs are off and on,” Capito continued, adding that she believes that “indicates there’s negotiations” ongoing and they will settle down eventually.
Trump’s planned 25 percent tariffs were set to go into effect last week on most Canadian and Mexican goods, but he quickly exempted imports that comply with the U.S-Mexico-Canada Agreement for one month. Others levied against Chinese imports went ahead.
The ongoing uncertainty over tariffs has spooked the market, which Trump has frequently cited as a benchmark of economic success. But many Republicans indicate are still willing to give Trump and his administration room to operate.
“I’m concerned, but I’m not surprised,” Sen. Thom Tillis (R-N.C.) said, noting that businesses and the markets hate uncertainty. “If you’re advising a client on risk, they got a wide spread right now, all the way from all of [the tariffs] being retracted to all of them being doubled. That has to settle down. I don’t mind it for a brief period of time, but that can be very unsettling to business investment decisions, market decisions.”
“It’s the natural testing of the boundaries that we’re going through right now, but that can’t go on in perpetuity,” Tillis added, noting that the tariffs that are not net-beneficial could cause inflation if the administration is not careful.
The administration over the past week has publicly tried to brace consumers, warning that they might be in for a bumpy ride in the near-term. Treasury Secretary Scott Bessent on Friday admitted that the economy was set for a “detox period.”
Trump also said during his address to a joint session of Congress last week that the public might see “a little disturbance.”
Lawmakers are hoping that any disturbance is brief, and that the tariffs Trump has implemented and proposed are short-lived. In particular, they warn the planned levies against Canada and Mexico could do harm to their individual states, especially rural ones.
“I think you all know my views on tariffs. I’m obviously in a different place on that,” Senate Majority Leader John Thune (R-S.D.) said. “But I’m hoping that the tariffs, when they achieve their stated objective, will be temporary in nature.”
The tariff questions are also set to keep up this week as the president’s 25 percent tariff on all foreign steel and aluminum is set to go into effect on Wednesday. Next month could also bring a new tariff on agricultural goods.
Trump’s comments about a potential recession also seemed to catch GOP members off guard as other top administration officials declared in recent days that one isn’t coming down the rails.
For now, they believe it’s too early to open that door and that the recent economic dip can be corrected in short order.
“That’s a little premature to say the least,” Sen. James Lankford (R-Okla.) said.
“If it’s long-term … you get concerned. But if it’s short-term, that’s the market,” he said. “There’s been a lot of conversations about corrections for a while. So a couple of days, [a] couple of weeks even — the market doesn’t drive the market forever.”
Trump was not the only one raising the possibility of a recession. Former Treasury Secretary Larry Summers, who was a leading voice on the left sounding the alarm over the possibility of extended levels of inflation during President Biden’s presidency, said on Monday that the chances of a downturn are nearly 50-50..
“I think there is a real possibility of a recession,” he wrote on X. “I would have said a couple months ago a recession was really unlikely this year. Now, it’s probably not 50/50 but getting close to 50/50.”
“There is one central reason,” he continued. “Economic policies that are completely counterproductive.”
