The US economy is heading for recession

THE odds of a recession in America rose in the past week. Still, it is not most analysts’ base case for this year. So, sticking with the newsletter Free Lunch’s contrarian tradition, here is why the world’s largest economy will succumb to a downturn in 2025.

The argument has two components. First, even before US President Donald Trump’s inauguration, the American economy was weaker than many appreciated. I outlined why in an opinion column in August and in an earlier edition of this newsletter, “Debunking American exceptionalism”.

Second, “Trumponomics” has damped the outlook further by introducing stagflationary forces and financial market risks.