Investing.com -- President Trump is "risking a recession over a policy with little political upside," according to BCA Research’s Marko Papic.
Despite speculation that the White House may be "engineering" an economic downturn, Papic warns that history suggests "the track record for weathering a recession, politically, is poor."
"President Trump’s political capital is actually already on thin ice," BCA writes, adding that narrow majorities in Congress "could become a constraint much faster than the midterm in November 2026."
The firm believes that if economic conditions worsen, the administration could face growing pressure to adjust course.
A key issue, according to BCA, is that "nobody actually wants a trade war. This is a fact."
Despite Trump’s hardline stance, escalating tariffs and geopolitical uncertainty may force him to "back off his maximalist demands relatively soon."
Furthermore, BCA says the limited exit strategies available could weaken the U.S. dollar while boosting gold, with BCA calling "the ’comeuppance trade’" the key macro theme for 2025.
Adding to the risks, "bond yields are not giving the kind of relief one would expect in a growth scare."
Instead of providing a cushion, BCA says higher yields could exacerbate economic pressures, further complicating Trump’s position.
Ultimately, BCA sees the administration reaching a "mid-year pivot away from the geopolitical VOL" as constraints mount.