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JPMorgan has raised its likelihood of the US economy entering a recession before the end of the year to 60% as President Donald Trump’s tariff plans upend markets worldwide.
The nation’s largest lender, led by Jamie Dimon, had previously put the chances of a recession at 40% before the commander-in-chief’s “Liberation Day” announcement of tariffs on Wednesday.
“Disruptive US policies have been recognized as the biggest risk to the global outlook all year,” JP Morgan’s chief economist Bruce Kasman wrote in a note to clients on Friday. “The latest news reinforces our fears, as US trade policy has turned decisively less business-friendly than we had anticipated.”
“We thus emphasize that these policies, if sustained, would likely push the US and possibly global economy into recession this year. An update of our probability scenario tree makes this point, raising the risk of a recession this year to 60%,” he added.
A recession is defined by American economic growth falling for two successive three-month periods
Trump unveiled a 10% baseline tariff on most US imports and higher reciprocal tariffs on dozens of countries.
Trump says he is targeting nations that he sees as pursuing unfair trade practices, with rates as high as 46% for Vietnam, 34% on China — on top of the 20% it already faces — 20% on the European Union, and 24% on Japan.
Kasman’s report branded the tariffs as a “functional tax increase” on US household and business purchases of imported goods.
The analysis said they effectively raise the US average tax rate “by roughly 22%-pts to an estimated 24%.”
“A hike of this size would be on par with the largest tax hike since WWII,” the JPMorgan research note read.
Last week, forecasters at JPMorgan’s crosstown rival Goldman Sachs raised the probability of a US recession to 35% from 20%, pointing to weaker economic fundamentals.
Goldman economists blamed the “sharp recent deterioration in household and business confidence, and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of these policies.”
US stock markets have been in freefall the past two days after having initially rallied following Trump’s resounding November election win as investors pinned their hopes on more business-friendly policies.
There is a fear among some on Wall Street that Trump’s surging tariffs will stunt growth, reignite inflation and lift unemployment.
Other research firms, including Barclays, BofA Global Research, Deutsche Bank, RBC Capital Marktrts and UBS Global Wealth Management, have also warned of a recession this year if Trump’s new levies, remain in place.
