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Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldTech stocks led a rebound on Wall Street on Monday amid rising optimism that Donald Trump’s impending tariffs will be less aggressive than feared.The blue-chip S&P 500 jumped 1.8 per cent, while the tech-heavy Nasdaq Composite rallied 2.3 per cent. Tesla, which has tumbled in recent weeks as Big Tech stocks have come under heavy pressure, soared nearly 12 per cent.Monday’s gains come after the S&P last week snapped a four-week losing streak and are the latest sign that a period of marked underperformance for US stocks this year may be easing. Analysts said sentiment had been boosted by reports over the weekend that the White House was considering watering down some of the tariffs expected to take effect on April 2, dubbed “Liberation Day” by Trump. The president said on Friday that there would be “flexibility” in his plans to apply reciprocal tariffs to US trading partners.“I think this ultra bearishness on the US and the end of US exceptionalism theme is a little overcooked,” said Brad Bechtel, an analyst at Jefferies. “We knew this was going to be a noisy process and the noise has created a lot of bearishness. [But] that bearishness will not last and the positive vibes can come back.”Better than expected US manufacturing and services sector data, released on Monday morning, provided investors with further encouragement. S&P Global’s flash US composite purchasing managers’ index rose to a three-month high of 53.5. Any reading above 50 suggests that most businesses are reporting growth in activity. Expansion in the US’s services sector accounted for the rise, with manufacturing activity contracting.Hope that “regularisation and rationalisation of tariff policy is coming” was driving the gains, said Thierry Wizman, global foreign exchange and rates strategist at Macquarie. US government bonds fell sharply on Monday as stocks climbed, with the 10-year Treasury yield, which moves inversely to prices, rising 0.09 percentage points to 4.34 per cent. The dollar rose 0.2 per cent against a basket of six other major currencies.Stocks held their gains after Trump said the US would impose a 25 per cent tariff on all imports from any country that buys oil or gas from Venezuela.European stocks were relatively subdued. The region-wide Stoxx Europe 600 fell 0.1 per cent and Germany’s Dax closed 0.2 per cent lower. London’s FTSE 100 was flat. Investors have rotated out of US equities this year after Trump outlined plans to radically reorientate trade policy and gave Elon Musk licence, as head of the so-called Department of Government Efficiency, to find potential savings across the federal government. More

Chances that the U.S. is heading for a recession are about 43%, according to a Deutsche Bank survey.
That raises more questions about the direction of the U.S. economy.

U.S. dollar banknotes and a label with the word “Recession” are seen in this illustration taken March 19, 2025.
Dado Ruvic | Reuters

Chances that the U.S. is heading for a recession are close to 50-50, according to a Deutsche Bank survey that raises more questions about the direction of the U.S. economy.
The probability of a downturn in growth over the next 12 months is about 43%, as set by the average view of 400 respondents during the period of March 17-20.

Though unemployment remains low and most data points suggest continuing if not slowing growth, the survey results reinforce the message from sentiment surveys that consumers and business leaders are increasingly concerned that a slowdown or recession is a growing risk.
Federal Reserve Chair Jerome Powell last week acknowledged the worries but said he still sees the economy as “strong overall” featuring “significant progress toward our goals over the past two years.”
Still, Powell and his colleagues at the two-day policy meeting that concluded Wednesday lowered their estimate for gross domestic product this year to just a 1.7% annualized gain. Excluding the Covid-induced retrenchment in 2020, that would be the worst growth rate since 2011.
Additionally, Fed officials raised their outlook for core inflation to 2.8%, well above the central bank’s 2% goal, though they still expect to achieve that level by 2027.

The combination of higher inflation and slower growth raise the specter of stagflation, a phenomenon not experienced since the early 1980s. Few economists see that era replicated in the current environment, though the probability is rising of a policy challenge where the Fed might have to choose between boosting growth and tamping down prices.

Markets have been nervous in recent weeks about the prospects ahead. Bond expert Jeffrey Gundlach at DoubleLine Capital told CNBC a few days ago that he sees the chances of a recession at 50% to 60%.
“The recent equity market correction was punctuated by the ‘uncertainty shock’ of ever-evolving tariff policy, with investors concerned it could morph into a slowdown or even recession,” Morgan Stanley said in a note Monday. “What’s really at the heart of the conundrum, however, is that the U.S. might be at risk for a bout of stagflation, where growth slows and inflation remains sticky.”
Powell, however, doubted that a repeat of the previous bout of stagnation is in the cards. “I wouldn’t say we’re in a situation that’s remotely comparable to that is likely,” he said.
Barclays analysts noted that “market-based measures are consistent with only a modest slowing in the economy,” though the firm expects a growth rate this year of just 0.7%, barely above the recession threshold.
UCLA Anderson, a closely watched and widely cited forecasting center, recently turned heads with its first-ever “recession watch” call for the economy, based largely on concerns over President Donald Trump’s tariffs.
Clement Bohr, an economist at the school, wrote that the downturn could come in a year or two though he said one is “entirely avoidable” should Trump scale back his tariff threats.
“This Watch also serves as a warning to the current administration: be careful what you wish for because, if all your wishes come true, you could very well be the author of a deep recession. And it may not simply be a standard recession that is being chaperoned into existence, but a stagflation,” Bohr said.
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Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump has recently notched up an impressive roll of investment pledges from companies as he attempts to turn the US into a manufacturing powerhouse. Last week, the chief of semiconductor giant Nvidia hinted at ploughing “several hundred billion” dollars into the country over the next four years. Multinational carmaker Stellantis, Japanese brewer Asahi, and South Korea’s automaker Hyundai have all recently unveiled plans for new US production. The White House proudly claims that “the list of manufacturing wins is endless”. The self-congratulation is premature. The Trump administration will find that there is a limit to how much investment it can attract, particularly if it persists with its central strategy of trying to prod businesses into the country with tariffs. For starters, the lead time to build a factory is often several years long. That means the costly decision to shift production to the US depends partly on how long businesses reckon the current protectionist stance will last. But companies have no clarity on what Trump’s plans to implement reciprocal tariffs next week looks like, let alone what US policy will be in a few years. With Trump’s import duties affecting numerous raw materials, such as aluminium and steel, producers will also wonder if domestic supply chains will be strong enough to meet their demand. Investors will be weighing up factors beyond tariffs too. The recent surge in US factory construction spending, which hit a half-century high in 2024, has largely been driven by financial incentives provided under the Biden administration. For instance, big investment pledges by semiconductor companies have been backed by subsidies from the Chips Act. But both that legislation and the Inflation Reduction Act — which offers tax credits for investments in renewable technologies — are in limbo under Trump, who has been deeply critical of them. Access to labour is another consideration. Right now, there are mounting warnings from industry that the White House’s large-scale plans to deport undocumented workers will exacerbate worker shortages, particularly in the manufacturing and construction sectors. New factories could face building delays. As it is, many companies complain of cumbersome and complex permitting processes. Signs of a slowdown in the US economy will also weigh on investors’ minds. Consumers, businesses and the stock market are flinching at the prospect of Trump’s inflationary tariffs and the widespread uncertainty.It will be tempting for the Trump administration to see recent pledges from manufacturers as proof that the threat of losing competitive access to the world’s richest consumer market is enough to attract investment. That will undoubtedly have played a role in some companies’ decisions. But broader factors are at play too. For instance, TSMC’s recent $100bn commitment included funds to boost research and development activities. Given the long timeframes to build factories, companies are also likely to be making decades-long decisions on the need to expand their US presence, regardless of tariffs. Still, for most foreign companies the least risky, and most logical, option would be to wait and see how US tariff plans evolve. Others may even double down on investment projects elsewhere, where the policy environment is more predictable. Smaller businesses, with less resilient balance sheets, might also find that they need to reduce their US exposure. Indeed, given America’s relatively high labour costs, the inability to procure low-cost imports from abroad could make some operations in the country less viable. There are bigger questions on why Trump believes a focus on manufacturing is the best path to greater US prosperity. But if the goal is to build more factories in the country, Trump is better off removing barriers to business, not raising them. More

IRS officials are expecting tax revenue to drop by more than 10% by April 15, the Washington Post reported.
Officials said the prediction is directly linked to shifting taxpayer behavior and President Donald Trump’s cuts at the IRS, the paper said.

Officials at the Internal Revenue Service and Treasury Department are anticipating tax revenue to drop more than 10% by April 15 compared with last year, the Washington Post reported Saturday, citing three people with knowledge of the situation.
The loss of tax receipts is expected as more individuals and businesses don’t file taxes or attempt to avoid paying balances owed to the IRS. The amount of lost federal revenue could top $500 billion, the paper said.

Officials said the prediction is directly linked to shifting taxpayer behavior and President Donald Trump’s cuts at the IRS, the Washington Post said.
Thousands are expected to lose their jobs at the agency as part of Elon Musk’s Department of Government Efficiency spending cuts. Experts have warned that the cuts during tax season could materially impact filers.
The IRS has also noted increased chatter online from people saying they won’t pay taxes this year or will make aggressive claims they aren’t eligible for in a gamble that they won’t be audited, the Washington Post reported.
The Treasury Department told the paper the story was “sensational and baseless” and said the anonymous sources “should be dismissed out of hand.”

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This article is an on-site version of our Swamp Notes newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday and Friday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersShipbuilding and maritime security will be all over the news this week. Today, the US Trade Representative will hold hearings on proposed interventions to support the US shipbuilding industry, which both the Trump administrations (and the Biden administration) believe have been unfairly hit by Chinese mercantilism. While some of the groups testifying (including a number of private businesses, foreign companies and state actors) will try to argue that the state supports being proposed by the Trump administration are illegal or unwarranted, I don’t think it will make much of a difference. Shipbuilding is where Trump will put his industrial policy stake in the ground. Indeed, I’ve been told by sources in or near the White House that the president’s new executive order on shipbuilding may drop as early as the end of this week. (In my column today I wrote about how the administration’s efforts to build more maritime security are part of a new Great Game in the Arctic). A leaked copy of the order was floating around last week, and it includes some pretty ambitious, whole of government goals to reconnect military and commercial shipbuilding. They included beefing up training for the maritime workforce (which has dwindled in the US), penalising adversaries like China with port fees and other restrictions, and also rewarding companies and countries that support US flagged vessels and American shipbuilding efforts.As Mike Wessel, the shipbuilding 301 case co-ordinator (and a member of the US-China Economic and Security Review Commission) told me last week, “If all the policies being discussed are implemented and durable, it would be the biggest investment and commitment to US maritime capabilities since the Liberty shipbuilding programme of the second world war.” For those readers who aren’t ship buffs, this was the public-private war effort that resulted in over 2,700 vessels being built in 18 shipyards in the US between 1941 and 1945, as part of the country’s war effort. Basically, the US built these ships faster than the Germans could sink them.I’ve written much about the reasons why America needs to bring back shipbuilding capacity, from the need for more security in the face of Chinese and Russia aggression near US territorial waters, to America’s over-reliance on China for commercial shipping. Every day brings a new drumbeat of maritime risk. See recent headlines about Chinese warships sailing closer to Sydney as China looks to project its power in the Pacific.But there are challenges. America recently signed an agreement with the Canadians and Finns to build icebreakers together. But amid the president’s tariff troubles with Canada, Prime Minister Mark Carney announced a $6bn Canadian deal with Australia to build Arctic radars to detect hypersonic missiles. That money might have gone to the US, but Carney is no pushover and has made it clear that Canada isn’t interested in being the 51st state. There are now calls for Canada to cancel an F-35 fighter jet order from the US.Likewise, the new US maritime strategy, while it is bipartisan (there’s a SHIPs Act on the table that was crafted by Democratic Senator Mark Kelly and former Republican representative Mike Waltz, now the national security adviser) will also have to walk a fine line between military and labour goals. While the defence department wants as many ships in the water as quickly as possible, labour leaders — including the United Steelworkers and the other unions that brought the 301 case — want as many new jobs and as much capacity created in the US as possible.One model for this would be the purchase of the Philadelphia shipyards by Korean company Hanwha. Another would be the outsourcing of shipbuilding to yards in places like South Korea or Japan. Unions and some security hawks worry that this won’t enhance the industrial base in the US but rather recreate some of the problems of the past 20 years of outsourcing. Either way, the US is going to need help from allies like the Finns and Koreans to retrain workers.Industrial policy is a tricky business at the best of times. Add in Trump’s unpredictability and you have a fragile and potentially volatile scenario. Julius, my question to you is, how do you imagine America’s shipbuilding efforts will go? What opportunities and pitfalls do you see here? And do you think Trump will crack a bottle of champagne on a new US icebreaker before he leaves office?  Recommended readingLots of wonderful pieces in the FT this week: I agree with Constanze Stelzenmüller that reopening Nord Stream 2 would be absolute folly for Europeans, who should continue to move away from dependence on Russian gas. And John Thornhill’s opinion piece on the fifth estate (social media) is a must-read. The ubiquity and power of hyper-individualised, high-speed media is a fundamental challenge to our politics and economics, one we ignore at our peril.Meanwhile, I just finished reading When the Going Was Good, former Vanity Fair editor Graydon Carter’s memoir, and I must say that I was disappointed. As a former Condé Nast magazine person, I was drawn in by the possibility of outrageous anecdotes about the glory days of publishing. And there were some of those, but there was also just a lot of stale navel-gazing and stories about Carter’s Canadian youth that I could have done without. There was also some name calling of writers and editors which I never enjoy. The book made me feel we should all finally close this chapter of New York media history and move on.Julius Krein responds At this point, the American commercial shipbuilding industry is so hollowed out that the first step in rebuilding it must involve attracting foreign shipbuilders to the US. In this respect, there are parallels with the Chips Act, one goal of which was to entice TSMC and Samsung to build production facilities here. But we’re starting from an even weaker position in shipbuilding. In 2022, the United States built only five oceangoing commercial vessels, compared to 1,794 in China and 734 in South Korea. We will, therefore, need foreign companies to lay basic foundations in manufacturing process knowledge, workforce training, and so on.The Biden administration previously identified icebreaker ships as a promising starting point, and I would expect continuity here. In addition to the geopolitical importance of the Arctic, it may be easier for the US to compete in markets for relatively specialised vessels — such as icebreakers — where price and quantity are not the only factors that buyers typically consider. Moreover, there are some benefits to starting from virtually zero. The need to construct new facilities is an opportunity to deploy at scale the most advanced manufacturing technologies. It should also be easier to optimise the co-location of new commercial and defence production facilities, rather than deal with stranded legacy assets. This presents an opportunity to build a larger manufacturing ecosystem that includes the adjacent technologies, supply chains and applications required for any shipyard to operate effectively.Ultimately, however, the shipbuilding industry is a game of competitive subsidisation. The major shipbuilding nations provide considerable support to their industries, and Michael Lind has recently shown how the elimination of subsidies under the Reagan administration resulted in the precipitous decline of US shipyards despite the Jones Act.With that in mind, US policymakers will need to consider more robust forms of investment support, in addition to the measures already announced by the Trump administration. Both shipyards and the vessels they produce provide ample opportunities for creative public-private financing structures as well as procurement and contracting mechanisms. America has somehow managed to financially engineer seemingly everything except critical national security supply chains and technologies; shipbuilding offers a chance to rectify that.The president’s executive actions should also be supported by complementary legislation. The bipartisan Ships for America Act has already been introduced. Passing bills like this through Congress would not only put more resources behind shipbuilding efforts, but would also signal a bipartisan policy commitment — and one that is more durable than executive orders alone — to private sector investors.Finally, on the question of allies, I would personally encourage the administration to take a more “materialist” approach to foreign policy. A core tenet of the “nationalist” perspective that drove Trump’s rise is respecting the sovereignty of other nations, rather than intervening in their internal debates to impose American values, or projecting our domestic culture wars on to them. American right-populists did not like it when Democratic administrations intervened in foreign elections on behalf of progressive parties. They should not be especially surprised, then, if interventions in the other direction end up generating hostility and blowback. Re-industrialisation in general, and shipbuilding in particular, offers an opportunity for more constructive engagement.Your feedbackWe’d love to hear from you. You can email the team on swampnotes@ft.com, contact Ed on edward.luce@ft.com and Rana on rana.foroohar@ft.com, and follow them on X at @RanaForoohar and @EdwardGLuce. We may feature an excerpt of your response in the next newsletterRecommended newsletters for youTrade Secrets — A must-read on the changing face of international trade and globalisation. Sign up hereUnhedged — Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here More