Cathie Wood: Trump will not easily trigger an economic recession, and technological innovation will be the engine of recovery.

Cathie Wood, the founder and CEO of ARK Invest, recently warned in her "IN THE KNOW" program video that the high tariff policies promoted by Trump could push the U.S. economy to the brink of recession. However, she also emphasized that innovative technology will play a key role in the next wave of economic recovery.

Tariff policy is chaotic, and the U.S. economy is at risk of recession.

Cathie Wood criticized Trump's logic in calculating "reciprocal trade" tariffs as unclear, and pointed out that the recently announced 10% comprehensive tariff and the second wave of tariffs against specific countries have caused significant turmoil in the market. China also quickly retaliated by imposing a 34% retaliatory tariff on American goods starting April 10, further escalating the trade war.

(Trump's tax on Taiwan is 32%! The U.S. reciprocal tariff is officially in effect: the entry fee is a minimum of 10%, reviving the American economy)

According to the Atlanta Fed's GDPNow model, the annualized real GDP growth rate in the United States for the first quarter may shrink by nearly 4%. Wood analyzes that this situation partly stems from companies hoarding inventory in advance to avoid new tariffs, leading to excess inventory and a slowdown in production, further increasing the likelihood of the economy falling into recession.

The labor market is turbulent, and white-collar confidence has been severely impacted.

Wood also pointed out that approximately 30% of the U.S. labor force is facing unstable employment prospects, including employees of federal agencies and public healthcare and educational institutions. These groups tend to reduce consumption due to anxiety over uncertain prospects.

In addition, the advancement of AI automation has led to a wave of layoffs among middle management in the technology and finance sectors. She also mentioned that the consumer confidence of high-income groups in March nearly collapsed, while low- to middle-income individuals have long been in a state of pessimism similar to that of the 2008 financial crisis. These phenomena have resulted in a sharp slowdown in the velocity of money circulation, further shrinking economic momentum.

( Hedge fund giant Bill Ackman warns: The tariff war could trigger an "economic nuclear winter" severely damaging America's reputation and market )

The political calculations behind Trump's negotiation strategy

Although the tariffs have caused market panic, Cathie Wood still believes that Trump will not easily plunge the economy into recession or drag down the stock market, because it will be detrimental to his record of building a "great president in history":

Trump may shift to a more moderate and constructive trade negotiation strategy as economic data worsens.

According to Wood's analysis, this "chaotic negotiation technique" is precisely the strategy he often employs in his "Art of Trading," attempting to secure the most favorable agreement at the last moment.

The end of the rolling recession, innovative technologies will lead to rebirth.

Since the Federal Reserve started the interest rate hike cycle in 2022, the United States has been in a phase of "rolling recession" across different industries, particularly in the housing market, automotive sector, and manufacturing, all of which continue to be sluggish.

(Is the chain effect of the US trade war fermenting? Canada is on the brink of an economic crisis, with inflation burning at both ends in the housing market)

But Wood emphasized that even if the economy faces two consecutive quarters of negative growth, the market should not misinterpret it as the beginning of a new recession.

If the current situation combines deregulation, tax cuts, and interest rate reductions, it will inject new vitality into the market. More importantly, innovative technologies such as AI, blockchain, and energy storage are rapidly maturing and are expected to significantly enhance productivity in the coming years, driving a strong economic rebound.

( Ark CEO Wood: AI technology innovation stocks welcome a new wave of explosion, Trump's tariffs reshape the global economy )

Crisis and opportunity coexist, innovation may become the biggest winner.

Cathie Wood's insights reveal the duality of short-term shocks caused by current policies and future opportunities. She warns that Trump may "play with fire" if he does not adjust his strategy; however, she also optimistically foresees that innovation will lead the next wave of economic growth. Investors need to closely monitor the progress of trade negotiations after April and respond cautiously to potential risks and opportunities.

This article Cathie Wood: Trump will not easily trigger an economic recession, technological innovation will be the engine of recovery first appeared in Chain News ABMedia.