"I don't care whether they officially call it a recession or not. In my industry, it is one": US companies are struggling with Trump's tariffs

Bob Jordan isn't waiting for official confirmation from Washington officials. For the CEO of the American airline Southwest Airlines, the situation is clear: the recession has already begun. Aside from the coronavirus pandemic, he says he has never seen such a sharp decline in air travel within the US. "I don't care if they officially call it a recession or not. In my industry, it is," Jordan is quoted as saying by Bloomberg. A recession is officially defined as a country's economy shrinking for two consecutive quarters.

The airline expects a substantial decline in revenue for the second quarter. Donald Trump's erratic tariff regime has unsettled consumers in the US. This is poison for the airline business. Jordan: "Uncertain consumers immediately stop spending money."

Southwest Airlines is by no means the only company feeling the effects of Trump's tariff policy. In addition to airlines, Fabian Keller, Senior Partner and Credit Specialist at Independent Credit View in Zurich, also cites the automotive industry, retail companies, luxury goods, and packaging as sectors that are particularly affected.

Statements from CEOs during the current reporting season also suggest this. Procter & Gamble, for example, isn't ruling out price increases due to rising costs. Restaurant chain Chipotle is seeing lower consumption because people are avoiding eating out, and beverage manufacturer PepsiCo is also significantly less optimistic about consumer sentiment today than it was three months ago.

Thomas Rühl, head of investments at Schwyzer Kantonalbank, agrees with airline CEO Jordan's statement: "The US is probably already in a recession." Sentiment indicators such as CEO surveys and consumer barometers have been pointing to this for some time, he says. These have proven to be quite robust in the past. Consumer sentiment in the United States has deteriorated. "People are foregoing services that aren't absolutely necessary," says Rühl.

The official GDP figures for the United States will be released on Wednesday. These are expected to be lower than in previous quarters. While the economy grew by 2.4 percent in the previous quarter, market participants now expect a slight growth of 0.4 percent, according to Zürcher Kantonalbank.

However, these figures should be treated with caution. This is primarily due to imports. Rühl says that economic development in the first three months of the year was distorted by so-called frontloading. "This means that companies were already trying to import as much as possible into the US and fill their warehouses before the tariffs were introduced." Increased activity was already noticeable in January and February.

According to data from the Bureau of Economic Analysis, more smartphones, computers, and medical equipment were imported into the United States in February. According to Rühl, this may lead to fewer imports in the coming months. Companies are reducing their inventories, which could again distort growth figures.

Only with the third-quarter figures, which will be released in October, are the statistics likely to reflect reality again. This is the conclusion reached by economists Johannes von Mandach and Klaus Wellershoff in a recent study . "What at first glance appears to be an economic downturn is, upon closer inspection, primarily the result of statistical effects in the calculation of gross domestic product," they write.

The value of all goods and services produced domestically is included in the calculation of GDP. Imports, on the other hand, appear to be a negative contribution. According to the two authors, the sharp increase in imports in recent months could lead to the actual economic growth of the USA being underestimated in the official figures. In practice, it is difficult to distinguish whether imported goods are directly used or temporarily stored. They estimate that GDP for the first quarter could be reported as much as 1.3 percentage points lower than its actual growth.

However, the distorted growth figures should not obscure the extent of uncertainty surrounding future developments in the US. "The big problem for companies, however, is that they can hardly grasp Donald Trump's economic policies," says Keller of Independent Credit View. While the American president has suspended tariffs for 90 days, what will happen after the moratorium remains unclear. Few expect the tariffs to disappear completely.

First of all, the tariffs have damaged confidence in the American economy. Companies have become significantly more cautious. They are halting investments, cutting costs for external consultants, or hiring fewer staff. "We have to control the things we can control. What we can't control, we have to at least try to mitigate," Mark George, CEO of rail operator Norfolk Southern, told investors.

However, Keller remains optimistic about the outlook for companies. "Most are now crisis-proof," he says. After the coronavirus pandemic came inflation and the interest rate turnaround. Now come tariffs. He is encouraged by the fact that most companies have shown discipline in taking on debt. For him, the question of debt and financial flexibility is crucial for navigating this crisis well. During the coronavirus pandemic, uncertainty for companies was also much higher than it is now, he says. From one day to the next, everything came to a standstill, and no one knew when the lockdowns would be lifted and the economy would restart.