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The US stock market has whipsawed this week over mounting concerns of an economic downturn, as president Donald Trump's trade war escalates.
Wall Street witnessed a selloff at the start of the week, after Trump declined to rule out the possibility that the US economy could dip into a recession this year, in an interview last Sunday.
There are growing fears that Trump's trade tariff plans could stoke already-stubborn inflation and weigh on economic growth.
Data released on Wednesday showed that inflation pressures eased in February, with the consumer price index (CPI) rising 2.8% over the year. This marked a fall from January's 3% annual gain and was lower than the 2.9% forecast by analysts, but still stands above the central bank target of 2%.
While the dip in February's CPI eased some concerns about inflation, this has been overshadowed by a volley of tariff threats.
Read more: UK economy shrinks in January in further setback for Rachel Reeves
On Thursday, Trump threatened a 200% levy on alcohol imports into the US from the European Union (EU). This came as a response to the EU's plans to impose a 50% tariff on American whisky, itself a retaliation to US duties on steel and aluminium imports.
Speaking to reporters at the White House later in the day, Trump doubled down on his tariff plans and said he was "not going to bend at all".
Following a punishing session on Thursday in which the S&P 500 (^GSPC) closed in correction territory, the US blue-chip index was up 1.6% on Friday at the time of writing. At the same time, gold prices (GC=F) crossed the $3,000 mark for the first time on Friday, with investors flocking to the precious metal as a safe-haven asset amid uncertainty.
Stephen Brown, deputy chief North America economist, said: "Comments from President Donald Trump and his cabinet members in the past week suggest that neither an economic downturn nor a severe stock market decline will deter the administration from pursuing its America First policy agenda.
"This raises the prospect that our policy assumptions are too timid and presents downside risks to our GDP [gross domestic product] forecasts."
We asked Yahoo Finance UK readers earlier in the week if they believed Trump's trade war would tip the US into a recession. We received 868 votes, with 75% believing it would, while 16% disagreed and 9% were undecided on the matter.
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