Economic forecasts show Trump’s tariffs having major global impact

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• Amna Nawaz:

  President Trump's trade wars are likely to slow down economic growth across the globe significantly this year. That is the projection from the International Monetary Fund today, estimating the U.S. economy will slow down by an entire percentage point compared to last year, growing by just 1.8 percent. Global growth was projected to slow by half of a percentage point.

• Geoff Bennett:

  Tariffs and uncertainty are rattling other important parts of the economy. The dollar has continued its slide, and investors are showing that they have new worries about treasury bonds, often some of the safest investments.

  But the U.S. markets rebounded substantially today. That came after Treasury Secretary Scott Bessent reportedly told investors that he believes the trade war with China is unsustainable and hopes tariffs on both sides could be eased.

  The Dow gained back more than 1,000 points, or 2.6 percent. The Nasdaq jumped 2.7 percent. And the S&P 500 also gained about 2.5 percent.

  And, late today, President Trump suggested he was open to easing up on the trade wars with China.

  Donald Trump, President of the United States: I'm not going to say, oh, I'm going to play hardball with China. I'm going to play hardball with you, President Xi. No, no. We're going to be very nice. They're going to be very nice. And we will see what happens.

  But, ultimately, they have to make a deal, because, otherwise, they're not going to be able to deal in the United States.

• Geoff Bennett:

  To help us understand the volatility in the markets, let's turn now to longtime financial journalist and CNBC contributor Ron Insana.

  Ron, it's great to be able to draw on your insights on a day like today. Thanks for being here.

• Ron Insana, CNBC Contributor:

  I was hoping to get some insights from you, Geoff.

  (Laughter)

• Geoff Bennett:

  We will see about that, friend.

• Ron Insana:

  This is as much volatility as I have seen in my lifetime.

• Geoff Bennett:

  Well, let's talk about that, because the treasury secretary reportedly saying he expects a de-escalation in the president's trade war with China. You heard the president there himself.

  What's your read on all that's happening? And what is this potentially setting the stage for?

• Ron Insana:

  Well, they're most clearly and most definitively listening to the financial markets, as you both outlined at the top of the show. I mean, not only is global growth being downgraded. U.S. growth is being downgraded, the IMF actually behind private economists in doing that.

  And then you have seen these ripples in the Treasury market, the decline in the dollar to a three-year low, the turmoil in the stock market. And financial instruments are telling politicians, number one, moving this fast without a plan is a very bad idea.

  Some of the ideas themselves are bad, like potentially firing Fed Chairman Jay Powell. And also just engaging in an all-out trade war is detrimental to growth, if not devastating, should it become a full-blown international event.

  And so I think they're starting to get the message, and particularly the treasury secretary is probably trying to talk the president off the ledge, as it were, with respect to some of the more harsh comments he's made about Jay Powell recently and also about this intensifying trade war with China, which the treasury secretary effectively called an embargo.

  That's a big word to use in an environment like this.

• Geoff Bennett:

  Well, you mentioned the markets. And let's talk more about that, because, before today's rally, The Wall Street Journal noted that the Dow Jones industrial average was headed for the worst April since the Great Depression, since 1932, because of a lack of confidence by investors.

  I mean, is this — this period of volatility, is this our new normal, at least for as long as this tariff plan, this trade war lasts?

• Ron Insana:

  Yes, I absolutely think volatility is going to remain elevated, I mean, maybe not to the extent that we saw in the last several weeks, but I do think that, until we get clarity around where these negotiations are going and what the actual endgame is, what we want from each and every one of our trading partners is clear, and whether or not there are agreements to be had.

  Remember, these often take months or years to construct, and they're trying to do multiple deals, as many as 70 deals, within 90 days. That's something that I would assume is impossible. Progress on this front would be helpful to financial markets, to be sure.

  But the issues around that, whether or not we have a fully set of sustainable deals that are long-term in nature, is really what the market needs to calm down and start following more traditional metrics like corporate earnings, the direction of interest rates, should lower rates be warranted, things like that, that are germane to typical market behavior.

• Geoff Bennett:

  Well, the president, at least for today, is easing up on China. He's also easing up apparently on the Fed chair, Jay Powell. Today he told reporters, he said: "I have no intention of firing him."

  Last week, he said — quote — "If I want him out, he will be out of there real fast, believe me."

  He's still voicing — the president is still voicing his desire for the Fed to cut rates. Is the Fed strong enough to resist the pressure? Because not every institution, not every American institution, as we have seen, has been strong enough to resist the pressure from the Trump administration.

• Ron Insana:

  Yes, I think the Fed most definitely is. I think Jay Powell has even said, both privately and maybe even publicly, that he would spend every last nickel that he has fighting to stay in his job.

  And the Fed, as an institution, has been extremely independent as an agency for quite some time. And, again, I think that the independence of the Fed is critical to the safety and soundness of U.S. assets, the way foreigners view the stability of the U.S. economy, the reliability of the dollar or U.S. Treasury bonds.

  All of those things are really important. Now, the Fed may still hear from Donald Trump, President Trump, on an ongoing basis about lowering rates, but the Fed will do what it does when it needs to do it. So I think this is going to be no longer a test of wills. I think Jay Powell now, given that the president just said that today, that he has no intention of firing Jay Powell, which my colleague Eamon Javers at CNBC asked him about, I think we're OK until his term expires.

  Who he ultimately replaces him with is an open question. But I think the Fed, now that the president has backed off, will be able to withstand these pressures.

• Geoff Bennett:

  And lastly, Ron, when the IMF, the International Monetary Fund, slashes its us and global economic forecasts, it says the U.S. economy is expected to grow by about 1.8 percent — that's down from its January estimate of 2.7 percent — put that in plain English.

  What does that mean for the economy and the prospects potentially of a recession?

• Ron Insana:

  Well, the IMF appears to be slightly more optimistic than most private economists. We have heard estimates that there's as much as a 90 percent chance of a recession if these tariffs remained in place for a sustained period.

  And so, personally, I think 1.8 percent is a little bit optimistic if the tariff negotiations go on for several more months. We're already hearing that shipments of goods from China have all but ceased and that ports in Los Angeles and Long Beach, California, have quieted down considerably and not receiving a lot of goods.

  And so these are long cycle types of phenomenon that if indeed this were to persist for some time, getting 1.8 percent growth would be a victory, given that we grew about 2.5 percent last year. My guess is that we're going to grow under 1 percent this year if this type of uncertainty persists, both in terms of market behavior and ultimately in terms of businesses' inability to plan around the tariffs, whatever they might be.

  This is — as I said earlier, this is going to take time to work out. So the first two or three-quarters of this year might be a little bit weaker than even the IMF is suggesting.

• Geoff Bennett:

  That is Ron Insana.

  Ron, always a pleasure. Thanks for being with us.

• Ron Insana:

  Thanks for having me.