Apollo's Slok Warns 90% Chance of U.S. Recession Due to High Tariffs

Apollo Global Management's chief economist, Torsten Slok, has issued a stark warning that the U.S. economy is at high risk of entering a recession this year if current high tariff levels persist. During an interview on a national financial news channel, Slok asserted that there is a 90% likelihood that the U.S. economy will experience two consecutive quarters of contraction, resulting in a 4% decline in Gross Domestic Product (GDP).

Slok's forecast is largely driven by the high tariffs imposed on one of the U.S.'s major trading partners. He underscored that these tariffs are particularly harmful to small businesses, which often lack the financial resources to cover the increased costs. "They basically don't have the funds or cash to pay for such high tariffs," Slok explained. "If this situation continues, we will see a wave of retail bankruptcies."

With a background that includes stints at the International Monetary Fund, the Organisation for Economic Co-operation and Development, Deutsche Bank, and Bank of America, Slok emphasized that any downturn in the retail sector would inevitably affect the labor market and consumer confidence. Small businesses, which account for 80% of the workforce, are especially vulnerable to these economic pressures.

Slok advised monitoring weekly unemployment claims closely, as this data will be the first indicator of any weakening in the job market. "The impact of tariffs is still heavily weighing on the U.S. economy, especially on small businesses," Slok noted. "We haven't seen this impact in the unemployment claims data yet, but we should expect it to happen."

Since April, predictions of an impending economic recession have become more frequent on Wall Street. However, the frequent changes in tariff policies have made it difficult for analysts to fully assess their impact. Earlier this month, an economist from a major asset management firm stated that the probability of a recession was 60%, contingent on whether the high tariffs remain in effect.

Slok's warnings are supported by over 1,200 economists who have signed a "Declaration Against Tariffs," criticizing the current tariff policies as misguided and potentially leading to a self-inflicted recession. The declaration highlights the broader economic concerns surrounding the ongoing trade disputes and their potential long-term effects on the U.S. economy.