The return of President Donald Trump to the White House has reignited concerns about the stability of the U.S. economy, with escalating global market volatility and geopolitical turbulence stoking fears of a potential recession.

Despite mounting warnings from economic experts, Trump has doubled down on his aggressive tariff policies, targeting not only geopolitical rivals but also traditional U.S. allies and key economic partners.

Economic experts have repeatedly cautioned that Trump’s tariff policies could have far-reaching negative impacts on the U.S. economy. Holger Schmieding, chief economist at Berenberg Bank, labeled Trump an “agent of chaos and confusion,” criticizing the president’s erratic approach to trade.

“Trump’s zigzagging on tariffs shows that he has little idea of the potential consequences of his tariff policies,” Schmieding told CNBC’s Squawk Box Europe.

However, Schmieding emphasized that while a recession may not be imminent, Trump’s policies are undermining long-term U.S. growth prospects.

“What is becoming ever clearer in the long run, Trump is hurting U.S. trend growth, that is growth in the years beyond 2026,” he noted.

Schmieding warned that Trump’s trade measures would likely lead to higher consumer prices and argued that the Federal Reserve (Fed) would have little reason to cut interest rates under Trump’s unpredictable leadership.

Tariffs Targeting Allies and Key Partners

Trump has not hesitated to impose tariffs on imports from countries traditionally considered close allies of the United States. His administration recently announced steep import tariffs on goods from China, Mexico, and Canada, leading to a fresh wave of uncertainty in international markets. While tariffs on U.S. neighbors and closest trading partners were delayed until April 2, the temporary reprieve did little to calm investor nerves.

The confusion surrounding Trump’s trade policies has left financial markets reeling. U.S. stock futures fell earlier this week, suggesting continued volatility. Analysts at JPMorgan’s U.S. Market Intelligence unit have adopted a “bearish” stance, anticipating prolonged market turbulence and a potential “cratering” of U.S. economic growth.

“We have already seen the negative impact that policy/trade uncertainty has had on both household and corporate spending, so it seems likely that we see a larger magnitude of this over the next month,” JPMorgan analysts warned. They advised monitoring key economic indicators such as unemployment rates and corporate layoffs for signs of a potential recession.

Economic Data Presents Mixed Signals

Recent U.S. economic data has been a mixed bag, showing both resilience and emerging signs of strain. The latest nonfarm payrolls report showed an increase of 151,000 jobs in February, falling short of the 170,000 jobs forecasted by analysts. The unemployment rate ticked up to 4.1%, raising concerns about a potential slowdown in the labor market, per CNBC.

Steven Blitz, chief U.S. economist at TS Lombard, maintained that the latest jobs data did not indicate heightened recession risks. However, he cautioned that Trump’s policies could unpredictably affect the economy.

“The sum of Trump’s actions can yet skew the economy in any which way, including an implosion of capital spending,” Blitz noted.

The Federal Reserve Bank of Atlanta’s GDPNow tracker projected a 2.4% contraction in U.S. GDP for the first quarter, raising the specter of a technical recession if the economy shrinks for two consecutive quarters. Despite this, the White House has not indicated a change in course on tariffs.

Trump has remained steadfast in his tariff strategy, brushing aside recession warnings from economists and market analysts. In an interview on Fox News’ Sunday Morning Futures, Trump described the current economic conditions as a “period of transition” and suggested that his policies were part of a broader effort to bring wealth back to the United States.

“There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing,” he said. “It takes a little time. It takes a little time.” Trump did not rule out the possibility of a recession but suggested that short-term economic pain was necessary for long-term gain.

However, Trump’s defiance could backfire if his policies trigger the very downturn he seeks to avoid. Many have argued that his tariffs could lead to stagflation—a dangerous mix of high inflation and high unemployment—forcing the Fed to keep interest rates steady instead of cutting them to stimulate growth.

Analysts Adopt a Bearish Outlook

Trump’s refusal to pivot away from his tariff policies has left analysts bracing for continued market volatility. JPMorgan’s analysts expressed concern over the potential escalation of the trade war, warning that this could drive both Canada and Mexico into recession and severely undermine U.S. GDP growth.

“Given the lack of a potential end to this escalation, the expectation is that tariffs of this magnitude will drive both Canada and Mexico into a recession,” JPMorgan warned, explaining their shift to a “Tactically Bearish” market outlook. They noted that prolonged tariffs could lead to lower earnings, forcing analysts to revise year-end forecasts downward.

Global Impact: Risks to Trade and Investment

The potential fallout from Trump’s tariffs extends beyond U.S. borders. Business leaders and economists have voiced concerns that higher tariffs could lead to increased inflationary pressures in the U.S., with consumers likely to bear the brunt of higher prices on imported goods. They also warn that investment, job creation, and economic growth could all suffer as businesses and consumers brace for a period of economic unpredictability.

Trump’s approach to trade has also strained diplomatic ties, with affected countries having imposed or considering retaliatory tariffs. This could create a tit-for-tat scenario, amplifying economic risks and further unsettling global markets. Economists worry that if the trade war escalates, the effects could ripple through supply chains, disrupting industries from technology to agriculture.

Nigeria’s petrol import bill surged to a historic N15.42 trillion in 2024, more than doubling the N7.51 trillion recorded in 2023, despite increased domestic refining capacity.

The alarming 105.3% rise underscores the nation’s persistent reliance on imported fuel, raising questions about the effectiveness of recent investments in local refineries.

Expectations were high that Nigeria’s dependence on fuel imports would decline following the operationalization of the 650,000-barrel-per-day (bpd) Dangote Petroleum Refinery and ongoing rehabilitation of the country’s three state-owned refineries. However, these hopes have not materialized as local refineries have struggled to achieve full production capacity to meet domestic demand.

Instead of easing the import burden, Nigeria’s fuel import bill shot up to the largest in its history, with recent data from the National Bureau of Statistics (NBS) revealing a worrying trend of rising import costs over the last five years. The import bill, which stood at N2.01 trillion in 2020, increased to N4.56 trillion in 2021, jumped to N7.71 trillion in 2022, and slightly dropped to N7.51 trillion in 2023 before hitting N15.42 trillion in 2024.

No Crude Oil for Local Refineries

The situation is expected to worsen as the Nigerian National Petroleum Company Limited (NNPCL) has reportedly informed local refiners that it has no crude oil for them. The NNPCL explained that its crude oil is tied to forward obligations, leaving local refineries, including the Dangote Refinery and the 210,000 bpd Port Harcourt Refining Company (PHRC), to source crude oil from international markets.

Under the scheme, the Federal Executive Council (FEC) allocated 450,000 barrels of crude per day for domestic consumption, with the Dangote Refinery as the pilot project. The NNPC was to supply at least 385,000 barrels per day (bpd) to the refinery, which has a capacity of 650,000 bpd. However, the national oil company has failed significantly.

The NNPCL has also suspended its naira-for-crude arrangement with Dangote Petroleum Refinery and other local refineries. The naira-for-crude initiative was launched on October 1, 2024, to reduce Nigeria’s dependence on costly petroleum product imports, conserve foreign exchange (FX), and bring down petrol prices. The initiative allowed local refineries to buy crude oil in naira instead of dollars, a measure aimed at stabilizing the local currency and ensuring consistent supply to domestic refiners.

This development is a significant blow to the local refining sector, as it suggests that even with increased refining capacity, Nigeria will still need to import refined products or import crude oil to keep the refineries running. This scenario could further escalate Nigeria’s already ballooning fuel import bill and increase the pressure on the nation’s foreign reserves.

Between September 11 and December 5, 2024, oil marketers imported 2.3 billion liters of petrol, highlighting the persistent need for imported fuel despite the commencement of production by the Dangote and Port Harcourt refineries. In total, 6.38 billion liters of Premium Motor Spirit (PMS) and Automotive Gas Oil (AGO) were imported in the past five months alone.

The Major Energies Marketers Association of Nigeria (MEMAN) defended this strategy, stating that importation fosters competition and helps keep pump prices in check. MEMAN’s Executive Secretary, Clement Isong, noted, “What importation does for us is that it contributes to the market’s competitiveness. The price movements you are enjoying and the market competition are the result of importation. Importation is useful.”

The inability of NNPCL to supply crude oil to local refineries is a critical setback. The company’s forward obligations mean that its crude oil is pre-committed to international deals, leaving domestic refiners stranded. This has forced local refineries to turn to the international crude market, which is both costlier and logistically challenging.

This development undermines the federal government’s ambition of achieving energy self-sufficiency and reducing Nigeria’s dependence on imported refined products. Instead of becoming a net exporter of refined petroleum, Nigeria may find itself importing both crude oil and refined products simultaneously, leading to a paradoxical situation that compounds forex demand and puts additional pressure on the naira.

Experts Warn of Economic Strain

Industry analysts have expressed concerns that if local refineries are forced to import crude oil at international prices, it will translate into higher production costs for locally refined fuel. Given that the Dangote Refinery and other local refineries must now compete with international importers for crude, there is a high likelihood that fuel prices in Nigeria could remain high or even increase further.

The impact of Nigeria’s fuel import dependency extends beyond the energy sector. Economists have noted how it affects forex reserves, disrupts fiscal planning, and contributes to inflationary pressures as imported fuel costs remain susceptible to global market fluctuations. The persistent demand for forex to pay for fuel imports is also noted to undermine efforts by the Central Bank of Nigeria (CBN) to stabilize the naira and manage inflation.

The situation is said to also have the potential of forcing the return of fuel subsidies, which the government announced its removal in 2023, as part of its reforms to free up funds for developmental projects.

The Manufacturers Association of Nigeria (MAN) has strongly opposed the Financial Reporting Council of Nigeria’s (FRCN) recently introduced financial charges under the amended FRCN Act 2023, warning that these fees could spell disaster for Nigeria’s struggling manufacturing sector.

In a statement, MAN’s Director General, Segun Ajayi-Kadir, described the charges as “astronomical” and called for their immediate suspension. He argued that the new fees add to an already overwhelming array of levies and regulatory costs that manufacturers are burdened with, exacerbating the challenges they face in an increasingly difficult business environment.

The crux of MAN’s criticism lies in the reclassification of non-listed manufacturing companies as Public Interest Entities (PIEs), making them subject to hefty financial obligations. The amended FRCN Act 2023, particularly Section 33, mandates annual charges for non-listed entities based on a percentage of their turnover. The maximum rate is set at 0.05% for companies with a turnover exceeding N10 billion.

Publicly listed companies, previously paying a capped fee of N1 million annually, now face a steep increase to N25 million. However, non-listed companies, which were previously excluded, face an even graver situation as there is no upper limit to their charges, regardless of their profitability.

“For non-listed companies, who were previously excluded, there is no cap, and it is linked to the turnover, irrespective of whether the company is profitable or not,” Ajayi-Kadir emphasized.

Harsh Penalties and Criminalization of Non-Compliance

In addition to the financial strain, the amended act introduces severe penalties for non-compliance, including a 10% monthly penalty for non-payment and the possibility of imprisonment for up to six months for defaulting Chief Executive Officers (CEOs).

Ajayi-Kadir argued that criminalizing non-payment of regulatory fees is excessive, noting that in most cases, regulatory breaches attract fines, not jail time.

“The strict penalties and possible conviction to imprisonment could be construed as having the nature of a criminal law. Generally, non-payment of fees/dues typically results in other penalties or fines, and imprisonment provisions are applicable only in cases where non-payment is seen as an act of defiance or fraud,” he explained.

An Avalanche of Fees and Levies

The new FRCN charges add to the myriad of levies, taxes, and fees already imposed on manufacturers. MAN has repeatedly criticized the multiplicity of regulatory charges, arguing that they significantly erode the competitiveness of Nigerian-made products.

Manufacturers are currently required to pay fees to various regulatory bodies, including the National Agency for Food and Drug Administration and Control (NAFDAC), the Standards Organization of Nigeria (SON), and several state and local government levies. These fees, often duplicated and inconsistent, contribute to the high cost of production in Nigeria.

Manufacturers Also Struggling with Power Issues

Beyond regulatory costs, Nigeria’s manufacturing sector continues to struggle with the high cost and unreliable supply of electricity. The sector relies heavily on self-generated power, primarily through diesel-powered generators, which significantly increases production costs.

Ajayi-Kadir has lamented that despite repeated promises, the government has yet to adequately address the power supply issue, which remains one of the largest challenges facing the sector. He noted that the epileptic power supply not only drives up costs but also hampers productivity.

Many manufacturers are spending more on diesel and maintenance of generators than they are on raw materials.

Economic Timing Could Not Be Worse

The timing of the FRCN’s new charges also raises concerns, coming at a period when manufacturers are already grappling with high inflation, forex shortages, and a challenging economic climate. The introduction of new fees now, MAN warns, could stifle investment and derail the government’s efforts to boost the productive sector.

“Introducing these charges during a period of economic difficulty could stifle investment in Nigeria’s productive sector,” Ajayi-Kadir said.

Contradiction to Ease of Doing Business Agenda

The FRCN’s move appears to run contrary to the government’s stated objective of improving the ease of doing business in Nigeria. Under President Bola Tinubu, the federal government has embarked on a tax reform agenda aimed at streamlining regulations, harmonizing taxes, and creating a business-friendly environment.

However, MAN argues that the FRCN’s policy undermines this agenda. The association is urging the FRCN to align its fees with the ongoing tax reform process to avoid counterproductive outcomes.

“MAN therefore implores the FRCN to be mindful of the potential negative impact of its continued administration of the fees on businesses and put it on hold. We admonish the FRCN to await the enactments of the tax reform laws and realign its operations with the relevant provisions,” Ajayi-Kadir noted.

Industry stakeholders are now calling on the federal government to intervene and prevent the implementation of the new charges. They argue that a balanced approach is needed to ensure that financial regulations do not stifle business growth.

Experts have suggested alternatives, including a phased implementation of the charges, setting a reasonable cap for non-listed companies, and providing waivers or reliefs for struggling businesses.