Investor Kyle Bass Says U.S. Needs A Reset -' A Slight Recession May Be The Price Tag To Fix Trade And Cut The Deficit'

What if a little economic pain could mean long-term gain? That’s the stance hedge fund manager Kyle Bass is taking. Best known for correctly betting against the U.S. housing market in 2008, Bass now believes that America needs a “reset”—and a slight recession may be the price tag to fix trade and cut the deficit.

During an April 10 interview with Bloomberg TV, Bass said the U.S. must rethink its trade relationships and rein in spending, even if it leads to short-term turbulence. His comments come as global markets react to President Donald Trump’s sweeping new tariff proposals.

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“We must reset our trade relationships with the rest of the world; we also must narrow our fiscal deficit in the U.S., and both of those things might be slightly recessionary,” Bass said. “We might have to go through a brief recession in order to rebuild our foundation,” he added.

Bass’s remarks echo Trump’s April's proposal to impose a 10% tariff on most imports, with higher rates for specific countries like China. The Trump administration claims tariffs would lure manufacturers to the U.S. and eliminate trade deficits, framing the April 2 announcement as “Liberation Day.”

However, several large American firms have begun hiking prices to offset increased import costs.

JPMorgan Chase JPM CEO Jamie Dimon pushed back in his April 7 annual letter to shareholders, expressing concern that rising prices and slowing growth would hurt consumers and delay investment.

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Bill Ackman, the founder of Pershing Square Capital Management, issued an even sharper critique. "The president has an opportunity to call a 90-day time out, negotiate and resolve unfair asymmetric tariff deals, and induce trillions of dollars of new investment in our country," he posted on X on April 6, adding that the current trade agenda risked sparking an "economic nuclear war."

In its April outlook, the International Monetary Fund revised its global growth forecasts downward, citing “unprecedented uncertainty” caused by ongoing trade tensions. While the IMF stopped short of predicting a global recession, it flagged heightened risks for developing and developed economies alike.

The U.S. is also dealing with internal economic pressures. Data from the Bureau of Economic Analysis showed the nation recorded a trade deficit of $122.70 billion in February—a slightly lower valuation compared to January’s $130.70 billion.

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Meanwhile, the Penn Wharton Budget Model warned that the long-run impact of tariffs could shrink GDP by 6%, reduce wages by 5%, and cost middle-income households up to $22,000 in lifetime earnings.

Still, Bass dismissed the idea of lasting economic damage. In his Bloomberg interview, he predicted only “a slight inflationary uptick on a couple of goods” and claimed the recessionary shock “will actually bring the general price level down.” He argued there’s no significant threat of stagflation.

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