JPMorgan Raises U.S. Recession Probability to 60% Amid Trump’s Tariff

Finance

JPMorgan Raises U.S. Recession Probability to 60% Amid Trumps Tariff

JPMorgan‘s economics team has increased its recession probability to 60% following U.S. President Donald Trump’s announcement of an aggressive tariff policy.

In a note titled “There Will Be Blood,” chief economist Bruce Kasman and his team highlighted the significant impact of the tariff increase, which they describe as the largest tax hike since 1968.

A Major Tax Hike with Far-Reaching Consequences

JPMorgans analysts pointed out that the tariff increase, amounting to a 22-percentage point rise, will have wide-ranging economic effects. They argue that the impact of this tax hike will be magnified by retaliatory measures from trading partners, a decline in U.S. business sentiment, and disruptions to global supply chains.

“The effect of this tax hike is likely to be magnified — through retaliation, a slide in U.S. business sentiment, and supply chain disruptions,” the economists said. While there is some flexibility built into the tariff hikes, allowing for potential fiscal policy easing, JPMorgan still believes that the shock will be substantial and could push the U.S. — and possibly the global economy — into recession this year.

Uncertainty in Recession Forecasts

While JPMorgan has not immediately revised its economic forecasts in light of the tariff announcement, the team emphasized that the full implementation of the tariffs and possible further negotiations will likely cause substantial macroeconomic disruptions not currently factored into their forecasts.

“We thus emphasize that these policies, if sustained, would likely push the U.S. and possibly global economy into recession this year,” JPMorgan said. Though the economists anticipate that any downturn will likely be mild, they cautioned that recessions are inherently unpredictable, and there are concerns that the long-term effects of these policies could have lasting consequences on U.S. economic growth.

Long-Term Supply Costs and Global Trade Impact

One of the key concerns raised by JPMorgan is the long-term impact of restrictive trade policies and reduced immigration flows. These factors could impose lasting supply-side costs, potentially reducing U.S. growth over the long run.

Furthermore, the analysts noted that the scale of the tariff hike — larger than the Smoot-Hawley tariff of 1930 — could have even more damaging effects now, given the increased share of imports in the U.S. economy and the broader globalization of trade. The current globalized trade environment makes the impact of such policies even more significant, the team explained.

Conclusion: A Global Recession on the Horizon？

JPMorgan‘s revised 60% recession probability underscores the serious economic risks posed by President Trump’s aggressive tariff stance. While the immediate economic fallout may not be catastrophic, the long-term effects on business sentiment, global supply chains, and U.S. economic growth could trigger a downturn. The economists concerns about lasting supply costs and the potential for sustained trade tensions suggest that the global economy may face substantial challenges in the coming months.

As the full impact of these tariffs continues to unfold, businesses and policymakers will need to closely monitor the evolving situation, which could have far-reaching consequences for both the U.S. and the global economy.